Salience / Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer.

Format:

Book

Author/Creator:

Bordalo, Pedro.

Contributor:

National Bureau of Economic Research.

Gennaioli, Nicola.

Shleifer, Andrei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29274.

NBER working paper series no. w29274

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

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.

Notes:

Print version record

September 2021.