Advanced Search
MyIDEAS: Login to save this paper or follow this series

Salience and Consumer Choice

Contents:

Author Info

  • Pedro Bordalo
  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's characteristics, in the precise sense of being furthest away in that good from its average level in the choice set (or more generally, an evoked set). A local thinker chooses among goods by attaching disproportionately high weights to their salient attributes. When goods are characterized by only one quality attribute and price, salience tilts choices toward goods with higher ratios of quality to price. We use the model to account for a variety of disparate bits of evidence, including decoy effects in consumer choice, context-dependent willingness to pay, balance of qualities in desirable goods, and shifts in demand toward low quality goods when all prices in a category rise. We then apply the model to study discounts and sales, and to explain demand for low deductible insurance.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w17947.pdf
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17947.

as in new window
Length:
Date of creation: Mar 2012
Date of revision:
Publication status: published as Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803 - 843.
Handle: RePEc:nbr:nberwo:17947

Note: CF IO
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  2. Michelle Sovinsky Goeree, 2008. "Limited Information and Advertising in the U.S. Personal Computer Industry," Econometrica, Econometric Society, Econometric Society, vol. 76(5), pages 1017-1074, 09.
  3. Simonson, Itamar, 1989. " Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, University of Chicago Press, vol. 16(2), pages 158-74, September.
  4. Bordalo, Pedro & Gennaioli, Nicola & Shleifer, Andrei, 2012. "Salience and Experimental Tests of the Endowment Effect," Scholarly Articles 10636304, Harvard University Department of Economics.
  5. Barseghyan, Levon & Molinari, Francesca & O'Donoghue, Ted & Teitelbaum, Joshua C., 2011. "The Nature of Risk Preferences: Evidence from Insurance Choices," Working Papers 11-03, Cornell University, Center for Analytic Economics.
  6. Ofer H. Azar, 2005. "Relative Thinking Theory," Microeconomics, EconWPA 0504002, EconWPA.
  7. Grether, David M. & Plott, Charles R., . "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 152, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Botond Koszegi & Adam Szeidl, 2013. "A Model of Focusing in Economic Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 53-104.
  9. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
  10. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, INFORMS, vol. 27(1), pages 15-25, 01-02.
  11. Botond Kőszegi & Paul Heidhues, 2008. "Competition and Price Variation When Consumers Are Loss Averse," American Economic Review, American Economic Association, vol. 98(4), pages 1245-68, September.
  12. Koszegi, Botond & Rabin, Matthew, 2004. "A Model of Reference-Dependent Preferences," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt0w82b6nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  13. Lazear, Edward P, 1986. "Retail Pricing and Clearance Sales," American Economic Review, American Economic Association, vol. 76(1), pages 14-32, March.
  14. John Leland, 2010. "Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies," Levine's Working Paper Archive 7644, David K. Levine.
  15. Nicola Gennaioli & Andrei Shleifer, 2009. "What comes to mind," Economics Working Papers 1186, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2009.
  16. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  17. Justin Sydnor, 2010. "(Over)insuring Modest Risks," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 177-99, October.
  18. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-77, September.
  19. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  20. Michael H. Birnbaum & Ulrich Schmidt, 2010. "Allais Paradoxes Can be Reversed by Presenting Choices in Canonical Split Form," Kiel Working Papers 1615, Kiel Institute for the World Economy.
  21. Wernerfelt, Birger, 1995. " A Rational Reconstruction of the Compromise Effect: Using Market Data to Infer Utilities," Journal of Consumer Research, University of Chicago Press, vol. 21(4), pages 627-33, March.
  22. Spiegler, Ran, 2011. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195398717, October.
  23. Botond Koszegi & Matthew Rabin, 2006. "Reference-Dependent Risk Attitudes," Levine's Bibliography 122247000000001267, UCLA Department of Economics.
  24. Camerer, Colin F & Ho, Teck-Hua, 1994. "Violations of the Betweenness Axiom and Nonlinearity in Probability," Journal of Risk and Uncertainty, Springer, vol. 8(2), pages 167-96, March.
  25. John G. Lynch , Jr. & Dan Ariely, 2000. "Wine Online: Search Costs Affect Competition on Price, Quality, and Distribution," Marketing Science, INFORMS, INFORMS, vol. 19(1), pages 83-103, April.
  26. Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-49, December.
  27. David A. Jaeger & Karl Storchmann, 2011. "Wine Retail Price Dispersion in the United States: Searching for Expensive Wines?," American Economic Review, American Economic Association, vol. 101(3), pages 136-41, May.
  28. Xavier Gabaix, 2011. "A Sparsity-Based Model of Bounded Rationality," NBER Working Papers 16911, National Bureau of Economic Research, Inc.
  29. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 353-68, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Johannes Stroebel, 2014. "Regulating Consumer Financial Products: Evidence from Credit Cards," 2014 Meeting Papers, Society for Economic Dynamics 126, Society for Economic Dynamics.
  2. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Competition for Attention," NBER Working Papers 19076, National Bureau of Economic Research, Inc.
  3. Mark Armstrong & Yongmin Chen, 2012. "Discount Pricing," Economics Series Working Papers 605, University of Oxford, Department of Economics.
  4. Daniel Friedman (University of California at Santa Cruz) & József Sákovics (The University of Edinburgh), 2014. "Tractable Consumer Choice," ESE Discussion Papers 240, Edinburgh School of Economics, University of Edinburgh.
  5. Cunningham, Thomas, 2013. "Biases and Implicit Knowledge," MPRA Paper 50292, University Library of Munich, Germany.
  6. repec:oup:qjecon:v:128:y:2012:i:1:p:53-104 is not listed on IDEAS
  7. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Asset Prices," American Economic Review, American Economic Association, vol. 103(3), pages 623-28, May.
  8. Kalaycı, Kenan & Serra-Garcia, Marta, 2012. "Complexity and Narrow Bracketing in Credit Choice," Discussion Papers in Economics 13035, University of Munich, Department of Economics.
  9. Keith M Marzilli Ericson & Amanda Starc, 2013. "How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 19527, National Bureau of Economic Research, Inc.
  10. Justine Hastings & Jesse M. Shapiro, 2012. "Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks," NBER Working Papers 18248, National Bureau of Economic Research, Inc.
  11. Umit G. Gurun & Gregor Matvos & Amit Seru, 2013. "Advertising Expensive Mortgages," NBER Working Papers 18910, National Bureau of Economic Research, Inc.
  12. Edward J. Webb, 2014. "Perception and quality choice in vertically differentiated markets," Discussion Papers 14-07, University of Copenhagen. Department of Economics.
  13. Shleifer, Andrei, 2012. "Psychologists at the Gate: Review of Daniel Kahneman’s Thinking, Fast and Slow," Scholarly Articles 10735580, Harvard University Department of Economics.
  14. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2014. "Stereotypes," NBER Working Papers 20106, National Bureau of Economic Research, Inc.
    • Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 1969. "Stereotypes," Working Paper 154836, Harvard University OpenScholar.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17947. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.