Stochastic Choice and Consideration Sets

We model a boundedly rational agent who suffers from limited attention. The agent considers each feasible alternative with a given (unobservable) probability, the attention parameter, and then chooses the alternative that maximises a preference relation within the set of considered alternatives. We show that this random choice rule is the only one for which the impact of removing an alternative on the choice probability of any other alternative is asymmetric and menu independent. Both the preference relation and the attention parameters are identi fied uniquely by stochastic choice data.

Multi-agent contracting with countervailing incentives and limited liability

We consider a principal who deals with a privately informed agent protected by limited liability in a correlated information setting. The agent's technology is such that the fixed cost declines with the marginal cost (the type), so that countervailing incentives may arise. We show that, with high liability, the first-best outcome can be effected for any type if (1) the fixed cost is non-concave in type, under the contract that yields the smallest feasible loss to the agent; (2) the fixed cost is not very concave in type, under the contract that yields the maximum sustainable loss to the agent. We further show that, with low liability, the first-best outcome is still implemented for a non-degenerate range of types if the fixed cost is less concave in type than some given threshold, which tightens as the liability reduces. The optimal contract entails pooling otherwise.

Imperfect Attention and Menu Evaluation

We model the choice behaviour of an agent who suffers from imperfect attention. We define inattention axiomatically through preference over menus and endowed alternatives: an agent is inattentive if it is better to be endowed with an alternative a than to be allowed to pick a from a menu in which a is is the best alternative. This property and vNM rationality on the domain of menus and alternatives imply that the agent notices each alternative with a given menu-dependent probability (attention parameter) and maximises a menu independent utility function over the alternatives he notices. Preference for flexibility restricts the model to menu independent attention parameters as in Manzini and Mariotti [19]. Our theory explains anomalies (e.g. the attraction and compromise effect) that the Random Utility Model cannot accommodate.

Competing for Attention: Is the Showiest also the Best?

We introduce attention games. Alternatives ranked by quality (producers, politicians, sexual partners...) desire to be chosen and compete for the imperfect attention of a chooser by investing in their own salience. We prove that if alternatives can control the attention they get, then ”the showiest is the best”: the equilibrium ordering of salience (weakly) reproduces the quality ranking and the best alternative is the one that gets picked most often. This result also holds under more general conditions. However, if those conditions fail, then even the worst alternative can be picked most often.