A Model of Attention and Anticipation

47 Pages Posted: 15 Jul 2015

See all articles by Joshua Tasoff

Joshua Tasoff

Claremont Colleges - Claremont Graduate University

Kristof Madarasz

London School of Economics & Political Science (LSE)

Date Written: November 12, 2009

Abstract

We develop a model in which people experience standard consumption utility, as well as anticipatory utility defined as the weighted sum of independently anticipated consumption “episodes” or “dimensions”. The weights on these dimensions correspond to the attention that the person pays to the dimension. We assume attention on a dimension increases when expected consumption utility in the dimension differs from expected consumption utility under the default action or the prior belief. We show that the decision maker will pay more for information about dimensions with high expected consumption utility, and the willingness to pay may be negative when expected consumption utility is low. Additionally, when expected consumption utility is sufficiently low, but not when it is high, the decision maker will follow the default action even if it is suboptimal from a consumption standpoint. Furthermore, given the decision maker’s current beliefs and preferences in a dimension, he will consume more in that dimension if he just received information. We then consider an advertisement application in which a monopolist decides whether to certifiably reveal the quality of various exogenous attributes of a good to a consumer who may choose to buy or not. There exists a sequential equilibrium for which the monopolist will not disclose information for attributes in which the consumer’s utility with the highest quality good is sufficiently worse than not buying the good. Competition increases disclosure.

Suggested Citation

Tasoff, Joshua and Madarasz, Kristof, A Model of Attention and Anticipation (November 12, 2009). Available at SSRN: https://ssrn.com/abstract=2629404 or http://dx.doi.org/10.2139/ssrn.2629404

Joshua Tasoff (Contact Author)

Claremont Colleges - Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

HOME PAGE: http://sites.cgu.edu/tasoffj/

Kristof Madarasz

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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