Salience and Consumer Choice

Pedro Bordalo, Nicola Gennaioli and Andrei Shleifer

No 17947, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's characteristics, in the precise sense of being furthest away in that good from its average level in the choice set (or more generally, an evoked set). A local thinker chooses among goods by attaching disproportionately high weights to their salient attributes. When goods are characterized by only one quality attribute and price, salience tilts choices toward goods with higher ratios of quality to price. We use the model to account for a variety of disparate bits of evidence, including decoy effects in consumer choice, context-dependent willingness to pay, balance of qualities in desirable goods, and shifts in demand toward low quality goods when all prices in a category rise. We then apply the model to study discounts and sales, and to explain demand for low deductible insurance.

JEL-codes: D03 D11 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-com and nep-mic
Note: CF IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803 - 843.

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Related works:
Working Paper: Salience and Consumer Choice (2015)
Journal Article: Salience and Consumer Choice (2013)
Working Paper: Salience and Consumer Choice (2013)
Working Paper: Salience and Consumer Choice (2012)
Working Paper: Salience and consumer choice (2012)
Working Paper: Salience and Consumer Choice
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