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

Victor Aguiar (), Maria Jose Boccardi Chalela (), Nail Kashaev and Jeongbin Kim

Papers from arXiv.org

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.

New Economics Papers: this item is included in nep-dcm, nep-exp, nep-neu and nep-upt
Date: 2018-12
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