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On the observable restrictions of limited consideration models: theory and application

Author

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  • Yuta Inoue

    (Waseda University, 1-6-1, Nishi-Waseda, Shinjuku-ku)

  • Koji Shirai

    (Kwansei Gakuin University, 1-155, Uegahara Ichiban-cho)

Abstract

This paper develops a revealed preference analysis for limited consideration models. A revealed preference test is given for the decision model obeying two well-established hypotheses on a decision maker’s consideration: the attention filter property and competition filter property. We also provide a test for the two-step decision model called the (transitive) rational shortlist method. We conduct simulations to compare the relative strength of observable restrictions across leading models, where we find drastic differences in Bronars’ indices of models.

Suggested Citation

  • Yuta Inoue & Koji Shirai, 2023. "On the observable restrictions of limited consideration models: theory and application," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(3), pages 695-715, April.
  • Handle: RePEc:spr:joecth:v:75:y:2023:i:3:d:10.1007_s00199-022-01418-4
    DOI: 10.1007/s00199-022-01418-4
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    References listed on IDEAS

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    6. Dean, Mark & Kıbrıs, Özgür & Masatlioglu, Yusufcan, 2017. "Limited attention and status quo bias," Journal of Economic Theory, Elsevier, vol. 169(C), pages 93-127.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Revealed preference; Limited consideration; Limited attention; Rational shortlisting; Bronars’ test;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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