Salience

Pedro Bordalo, Nicola Gennaioli and Andrei Shleifer

No 29274, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We review the fast-growing work on salience and economic behavior. Psychological research shows that salient stimuli attract human attention “bottom up” due to their high contrast with surroundings, their surprising nature relative to recalled experiences, or their prominence. The Bordalo, Gennaioli and Shleifer (2012, 2013, 2020) models of salience show how bottom up attention can distort economic choice by distracting decision makers from their immediate goals or from certain choice attributes. We show that this approach explains many puzzles: separately treated departures from “rationality” such as probability weighting, menu effects, reference point effects, and framing, emerge as distinct manifestations of the same principle of bottom up attention to salient stimuli. We highlight new predictions and discuss open conceptual questions, as well as potential applications in finance, industrial organization, advertising, and politics.

JEL-codes: D0 D03 D81 D90 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-isf, nep-neu, nep-pke and nep-upt
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Published as Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2022. "Salience," Annual Review of Economics, vol 14(1).

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