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When more is less: Limited consideration

Author

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  • Lleras, Juan Sebastián
  • Masatlioglu, Yusufcan
  • Nakajima, Daisuke
  • Ozbay, Erkut Y.

Abstract

There is well-established evidence that decision makers consistently fail to consider all available options. Instead, they restrict attention to only a subset of alternatives and then undertake a more detailed analysis of this reduced set. This systematic lack of consideration of available options can lead to a “more is less” effect, where excess of options can be welfare-reducing for a decision-maker (DM). Building on this idea, we model individuals who might pay attention to only a subset of the choice problem presented to them. Within this smaller set, a DM is rational in the standard sense, and she chooses the maximal element with respect to her preference. We provide a choice theoretical foundation for our model. In addition, we show which alternatives are revealed preferred to which and discuss welfare implications.

Suggested Citation

  • Lleras, Juan Sebastián & Masatlioglu, Yusufcan & Nakajima, Daisuke & Ozbay, Erkut Y., 2017. "When more is less: Limited consideration," Journal of Economic Theory, Elsevier, vol. 170(C), pages 70-85.
  • Handle: RePEc:eee:jetheo:v:170:y:2017:i:c:p:70-85
    DOI: 10.1016/j.jet.2017.04.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Revealed preferences; Attention; Consideration set; Preference reversal;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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