Imperfect attention and menu evaluation

Abstract

We model the choice behaviour of an agent who suffers from imperfect attention but is otherwise von Neumann Morgenstern rational. We define inattention axiomatically through preference over menus and endowed alternatives: an agent is inattentive if it is better to be endowed with an alternative a than to be allowed to pick a from a menu in which a is is the best alternative. This property and vNM rationality on the domain of menus and alternatives imply that the agent notices each alternative with a given menu-dependent probability (attention parameter) and maximises a menu independent utility function over the alternatives he notices. Preference for flexibility restricts the model to menu independent attention parameters as in Manzini and Mariotti (2013). Our theory explains anomalies (e.g. the attraction effect) that other prominent stochastic choice theories cannot accommodate.