IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/vcontributions.5y2005i1n5.html
   My bibliography  Save this article

Limited Attention as the Bound on Rationality

Author

Listed:
  • Gifford Sharon

    (Rutgers University, sgifford@andromeda.rutgers.edu)

Abstract

A utility maximizing model of allocating limited attention between adopting new behaviors and adapting current behaviors generates an optimal policy that resembles commonly observed, and apparently irrational, behavioral rules. The ability to update current behaviors implies an endogenous opportunity cost of adopting a new behavior. If this cost is sufficiently high, then behaviors are less than substantively rational. However, if this high cost of attention is ignored, then behaviors are less rational than if this cost is considered. This is because more rational behaviors are updated less frequently and so economize on attention in the future.

Suggested Citation

  • Gifford Sharon, 2005. "Limited Attention as the Bound on Rationality," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-42, December.
    • Handle: RePEc:bpj:bejtec:v:contributions.5:y:2005:i:1:n:5
    DOI: 10.2202/1534-5971.1108
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1534-5971.1108
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1534-5971.1108?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roy Clemons, 2010. "Do external sources generate greater investor awareness that can affect a firm's value and cost of capital?," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 9(4), pages 382-394, November.
    2. D. Dragone, 2006. "Endogenous Attention Costs and Intertemporal Decision-Making," Working Papers 570, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Kaine, Geoff & Lees, Jim & Wright, Vic, 2007. "An Approach to Predicting Demand for an Agricultural Innovation," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 15.
    4. Garrett, Vicki & Koontz, Tomas M., 2008. "Breaking the cycle: Producer and consumer perspectives on the non-adoption of passive solar housing in the US," Energy Policy, Elsevier, vol. 36(4), pages 1551-1566, April.
    5. Takii, Katsuya, 2009. "Limited attention, interaction and the gradual adjustment of a firm's decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 345-362, February.
    6. Latoeiro, Pedro & Ramos, Sofía B. & Veiga, Helena, 2013. "Predictability of stock market activity using Google search queries," DES - Working Papers. Statistics and Econometrics. WS ws130605, Universidad Carlos III de Madrid. Departamento de Estadística.
    7. Stefano Giglio & Kelly Shue, 2013. "No News is News: Do Markets Underreact to Nothing?," NBER Working Papers 18914, National Bureau of Economic Research, Inc.
    8. Dragone, Davide, 2009. "I am getting tired: Effort and fatigue in intertemporal decision-making," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 552-562, August.
    9. Shane A. Corwin & Jay F. Coughenour, 2008. "Limited Attention and the Allocation of Effort in Securities Trading," Journal of Finance, American Finance Association, vol. 63(6), pages 3031-3067, December.
    10. Schuster, Stephan, 2012. "Applications in Agent-Based Computational Economics," MPRA Paper 47201, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:contributions.5:y:2005:i:1:n:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.