A Testable Theory of Imperfect Perception
We introduce a rational choice theory that allows for many forms of imperfect perception, including failures of memory, selective attention, and adherence to simplifying rules of thumb. Despite its generality, the theory has strong, simple, and intuitive implications for standard choice data and for more enriched choice data. The central assumption is rational expectations: decision makers understand the relationship between their perceptions, however limited they may be, and the (stochastic) consequences of their available choices. Our theory separately identifies two distinct "framing" effects: standard effects involving the layout of the prizes (e.g. order in a list) and novel effects relating to the information content of the environment (e.g. how likely is the first in the list to be the best). Simple experimental tests both affirm the basic model and confirm the existence of information-based framing effects.
|Date of creation:||Jun 2011|
|Date of revision:|
|Publication status:||published as Caplin, Andrew, and Daniel Martin (2014), “A Testable Theory of Imperfect Perception,” The Economic Journal, forthcoming.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
- Gottlieb, Daniel, 2014. "Imperfect memory and choice under risk," Games and Economic Behavior, Elsevier, vol. 85(C), pages 127-158.
- Xavier Gabaix, 2011.
"A Sparsity-Based Model of Bounded Rationality,"
NBER Working Papers
16911, National Bureau of Economic Research, Inc.
- Faruk Gul & Wolfgang Pesendorfer, 2005.
"Random Expected Utility,"
122247000000000834, UCLA Department of Economics.
- Haluk Ergin & Todd Sarver, 2010. "A Unique Costly Contemplation Representation," Econometrica, Econometric Society, vol. 78(4), pages 1285-1339, 07.
- Nicola Gennaioli & Andrei Shleifer, 2010.
"What Comes to Mind,"
The Quarterly Journal of Economics,
MIT Press, vol. 125(4), pages 1399-1433, November.
- Nicola Gennaioli & Andrei Shleifer, 2009. "What comes to mind," Economics Working Papers 1186, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2009.
- Nicola Gennaioli & Andrei Shleifer, 2009. "What Comes to Mind," NBER Working Papers 15084, National Bureau of Economic Research, Inc.
- Matthew Rabin & Georg Weizsacker, 2009.
"Narrow Bracketing and Dominated Choices,"
American Economic Review,
American Economic Association, vol. 99(4), pages 1508-43, September.
- Caplin, Andrew & Dean, Mark, 2011. "Search, choice, and revealed preference," Theoretical Economics, Econometric Society, vol. 6(1), January.
- Richard H. Thaler, 2008.
"Mental Accounting and Consumer Choice,"
INFORMS, vol. 27(1), pages 15-25, 01-02.
- Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
- Yuval Salant & Ariel Rubinstein, 2008. "(A, f): Choice with Frames -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1287-1296.
- Faruk Gul & Wolfgang Pesendorfer, 2005. "The Case for Mindless Economics," Levine's Working Paper Archive 784828000000000581, David K. Levine.
- Nakajima, Daisuke & Masatlioglu, Yusufcan, 2013. "Choice by iterative search," Theoretical Economics, Econometric Society, vol. 8(3), September.
- Elena Reutskaja & Rosemarie Nagel & Colin F. Camerer & Antonio Rangel, 2011. "Search Dynamics in Consumer Choice under Time Pressure: An Eye-Tracking Study," American Economic Review, American Economic Association, vol. 101(2), pages 900-926, April.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17163. 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 references are entirely missing, you can add them using this form.