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Does Random Consideration Explain Behavior when Choice is Hard? Evidence from a Large-scale Experiment

Author

Listed:
  • Victor H. Aguiar
  • Maria Jose Boccardi
  • Nail Kashaev
  • Jeongbin Kim

Abstract

We study population behavior when choice is hard because considering alternatives is costly. To simplify their choice problem, individuals may pay attention to only a subset of available alternatives. We design and implement a novel online experiment that exogenously varies choice sets and consideration costs for a large sample of individuals. We provide a theoretical and statistical framework that allows us to test random consideration at the population level. Within this framework, we compare competing models of random consideration. We find that the standard random utility model fails to explain the population behavior. However, our results suggest that a model of random consideration with logit attention and heterogeneous preferences provides a good explanation for the population behavior. Finally, we find that the random consideration rule that subjects use is different for different consideration costs while preferences are not. We observe that the higher the consideration cost the further behavior is from the full-consideration benchmark, which supports the hypothesis that hard choices have a substantial negative impact on welfare via limited consideration.

Suggested Citation

  • Victor H. Aguiar & Maria Jose Boccardi & Nail Kashaev & Jeongbin Kim, 2018. "Does Random Consideration Explain Behavior when Choice is Hard? Evidence from a Large-scale Experiment," Papers 1812.09619, arXiv.org, revised Jun 2019.
  • Handle: RePEc:arx:papers:1812.09619
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    References listed on IDEAS

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    2. Andrew Caplin & Daniel J. Martin, 2020. "Framing, Information, and Welfare," NBER Working Papers 27265, National Bureau of Economic Research, Inc.
    3. Changkuk Im & John Rehbeck, 2021. "Non-rationalizable Individuals, Stochastic Rationalizability, and Sampling," Papers 2102.03436, arXiv.org, revised Mar 2021.
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    5. Georgios Gerasimou, 2020. "The Decision-Conflict and Multicriteria Logit," Papers 2008.04229, arXiv.org, revised Nov 2020.

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