Choice and Attention across Time

TL;DR

This paper develops a framework linking past and future choices through attention, revealing how limited attention influences decision sequences and can be used to identify and analyze rationality violations.

Contribution

It introduces a novel framework connecting attention, choice sequences, and rationality violations, extending to framing effects and enabling analysis of limited attention.

Findings

Choice sequences reveal traces of limited attention.

The framework accommodates various attention structures.

Choice sequences help identify rationality violations.

Abstract

I study how past and future choices are linked in the framework of attention. Attention cannot be observed but past choices are necessarily considered in future decisions. This link connects two types of rationality violations, counterfactual and realized, where the former results from inattention and the latter fully pins down preferences. Results show that the necessary traces of limited attention lie within choice sequences because they enable and compel a decision maker to correct their "mistakes". The framework accommodates different attention structures and extends to framing, introducing choice sequences as an important channel to formulate, identify, and scrutinize limited attention.