“Attention Utility: Theory and Evidence” by Prof. Chew Soo Hong
Prof. Chew Soo Hong
Southwestern University of Finance & Economics
Building on weighted utility theory (Chew, 1983), we offer an attention-augmented utility model with a stable utility function and an unstable attention function which delivers decision weights resembling the divisive normalization form in the miserly-brain literature (Clark, 2013; Hohwy, 2013). For uniform finite lotteries, our axiomatization delivers attention-dependent decision weights which can accommodate the highly volatile nature of the attentional process. The value of our model is demonstrated in terms of how it can account for a rich range of choice anomalies with shared roots in attentional limitations and at the same time accommodate behavior often associated with the idea of ‘rational’ choice under high attentiveness. The model can further account for recent evidence (Bernheim and Sprenger, 2020) on continuity of decision weights, which favor rank-independent probability weighting, and discontinuity of certainty equivalent in event-splitting, pointing to effects of complexity aversion.
(This is an on-site and virtual economics seminar.)