Random Attention and Unobserved Reference Alternatives

TL;DR

This paper introduces two models of random attention that incorporate unobserved reference alternatives, analyzing how menu dependence affects identification of preferences and references, with implications for understanding decision-making processes.

Contribution

It develops and characterizes two novel models of random attention with unobserved references, providing identification results under menu dependence and independence.

Findings

Partial identification of reference alternatives and preferences under menu dependence.

Complete identification of references with multiple menu-independent references.

Coarse identification of preferences with independent random attention functions.

Abstract

In this paper, I develop and characterize two models of random attention that differ from each other with respect to the menu-dependence of the unobserved reference alternatives. In both models, the decision-maker pays attention to subsets of the available set of alternatives randomly with the reference alternatives being always paid attention to. Under menu-dependence, partial identification of both the reference alternatives and the underlying preferences is provided. For the case of multiple menu-independent references, I provide a complete identification of the references and a coarse identification of the underlying preferences. A complete identification of the latter is provided when the independent random attention function is considered.