45 Pages Posted: 16 Sep 2003
Date Written: August 29, 2003
A host of recent studies show that attention allocation has important economic consequences. This paper reports the first empirical test of a cost-benefit model of the endogenous allocation of attention. The model assumes that economic agents have finite mental processing speeds and cannot analyze all of the elements in complex problems. The model makes tractable predictions about attention allocation, despite the high level of complexity in our environment. The model successfully predicts the key empirical regularities of attention allocation measured in a choice experiment. In the experiment, decision time is a scarce resource and attention allocation is continuously measured using Mouselab. Subject choices correspond well to the quantitative predictions of the model, which are derived from cost-benefit and option-value principles.
Keywords: attention, satisficing, Mouselab, bounded rationality, behavioral economics, experimental economics, cognitive modeling
JEL Classification: C7, C9, D8
Suggested Citation: Suggested Citation
Gabaix, Xavier and Laibson, David and Moloche, Guillermo and Weinberg, Stephen Ernest, The Allocation of Attention: Theory and Evidence (August 29, 2003). MIT Department of Economics Working Paper No. 03-31. Available at SSRN: https://ssrn.com/abstract=444840 or http://dx.doi.org/10.2139/ssrn.444840