Working Paper: CEPR ID: DP13268
Authors: Xavier Gabaix
Abstract: Inattention is a central, unifying theme for much of behavioral economics. It permeates such disparate fields as microeconomics, macroeconomics, finance, public economics, and industrial organization. It enables us to think in a rather consistent way about behavioral biases, speculate about their origins, and trace out their implications for market outcomes.This survey first discusses the most basic models of attention, using a fairly unified framework. Then, it discusses the methods used to measure attention, which present a number of challenges on which a great deal of progress has been achieved, although much more work needs to be done. It then examines the various theories of attention, both behavioral and more Bayesian. It finally discusses some applications. For instance, inattention offers a way to write a behavioral version of basic microeconomics, as in consumer theory and Arrow-Debreu. A last section is devoted to open questions in the attention literature.This chapter is a pedagogical guide to the literature on attention. Derivations are self-contained.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inattention to true prices and shrouding of add-on costs (D43) | misperception of prices (P22) |
| misperception of prices (P22) | muted demand sensitivity (E41) |
| attention level (m) (E66) | misperception of prices (P22) |
| inattention to taxes (H26) | perceived tax (H22) |
| perceived tax (H22) | implications for tax incidence theory (H22) |
| inattention (D91) | present-biased agents perceive future utility differently (D15) |
| present-biased agents perceive future utility differently (D15) | alters decision-making process (D91) |