Dynamic Choice with Volitional Attention

Abstract

Dynamic choices of cognitively constrained individuals have been ascribed, by the rational inattention theory, as being a filtering problem, in which the attentional intensity is consciously elected. Human attention, however, is not merely of voluntary intensity; it is rather of volitional placement nature. In this article, I study the implications of a dynamic theory of volitional attention describing individuals who choose among the alternatives that are induced by their attentional choices. Firstly, a consumer search application using US scanner data indicates that attentional choices are characterized by complementarities. Costs do not exclusively depend on the cardinality of consideration sets, but also on experience and similarities between considered items. Neglecting, thereby, attentional placement aspects potentially leads to misidentification of preference characteristics. Secondly, participation inertia in financial markets is revisited under the scope of volitional attention and a cultural-based argument of why it can be optimal not to participate is provided.

Keywords: bounded rationality, volitional attention, attentional costs, consideration sets, endogenous choice sets, consumer research

JEL Classification: C61, D11, D91, M31