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Inferring Cognitive Heterogeneity from Aggregate Choices

Author

Listed:
  • Valentino Dardanoni

    () (Universita' degli Studi di Palermo)

  • Paola Manzini

    () (University of St Andrews and IZA)

  • Marco Mariotti

    () (Queen Mary University of London)

  • Christopher J. Tyson

    () (Queen Mary University of London)

Abstract

We study the problem of recovering the distribution of cognitive characteristics in a population of boundedly rational agents from their aggregate choices. In contrast to much of the theoretical literature on bounded rationality, we make use of choices from a fixed menu of alternatives rather than from a rich collection of menus. We examine in detail two models of choice with limited attention, and we show that both “consideration probability” and “consideration capacity” distributions are substantially identified by aggregate choice shares. These two models are applied to data on over-the-counter painkiller sales, yielding concurrent estimates that on average two or three out of the eight available products are considered in this market. We also demonstrate how our framework can be used “counterfactually” for welfare analysis.

Suggested Citation

  • Valentino Dardanoni & Paola Manzini & Marco Mariotti & Christopher J. Tyson, 2017. "Inferring Cognitive Heterogeneity from Aggregate Choices," Discussion Paper Series, School of Economics and Finance 201701, School of Economics and Finance, University of St Andrews, revised 25 May 2017.
  • Handle: RePEc:san:wpecon:1701
    as

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    File URL: http://www.st-andrews.ac.uk/~wwwecon/repecfiles/4/1701.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Francesco Cerigioni, 2016. "Dual Decision Processes: Retrieving Preferences when some Choices are Automatic," Working Papers 924, Barcelona Graduate School of Economics.
    2. Victor H. Aguiar & Nail Kashaev, 2019. "Discrete Choice and Welfare Analysis with Unobserved Choice Sets," Papers 1907.04853, arXiv.org, revised Jul 2019.
    3. Levon Barseghyan & Francesca Molinari & Matthew Thirkettle, 2019. "Discrete choice under risk with limited consideration," CeMMAP working papers CWP08/19, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.

    More about this item

    Keywords

    attention; bounded rationality; revealed preference; stochastic choice;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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