Limited Attention and Procedural Decision Making

Regents Of The University Of Michigan - Ann Arbor, Ann Arbor MI

Investigators

Abstract

This award funds work to develop a new mathematical model of decision making with limited attention. The goal is to build a new link between research on decision theory and research on bounded rationality. The end result is new ways to analyze, predict, and understand how individuals make decisions. Numerous studies in psychology, finance, marketing, and other areas have demonstrated that people have limited attention for making choices. That is, rather than considering all possible options most people first compare and then choose from a much more limited set of options called a consideration set. The project is designed to answer three broad kinds of research questions. First, how can social scientists infer preferences and consideration sets from datat that only records the choices people made, not the specific options considered? Second, what are the specific ways in which decision makers with this kind of limited attention behave in ways that cannot be explained by standard economic models? Third, how do people decide what options to consider? How do they form their consideration sets and what effect do outside factors like marketing campaigns or public policy have on these consideration sets? Theis research will have broader impact by using methods and tools from microeconomic theory to answer questions of interest to a large and interdisciplinary research community. In addition, the research has the potential to guide public policy to new kinds of "nudge" interventions that might be able to guarantee that individuals consider the right set of options, a set that does not arbitrarily exclude excellent choices.