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Random Utility and Limited Consideration

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  • Victor H. Aguiar
  • Maria Jose Boccardi
  • Nail Kashaev
  • Jeongbin Kim

Abstract

The random utility model (RUM, McFadden and Richter, 1990) has been the standard tool to describe the behavior of a population of decision makers. RUM assumes that decision makers behave as if they maximize a rational preference over a choice set. This assumption may fail when consideration of all alternatives is costly. We provide a theoretical and statistical framework that unifies well-known models of random (limited) consideration and generalizes them to allow for preference heterogeneity. We apply this methodology in a novel stochastic choice dataset that we collected in a large-scale online experiment. Our dataset is unique since it exhibits both choice set and (attention) frame variation. We run a statistical survival race between competing models of random consideration and RUM. We find that RUM cannot explain the population behavior. In contrast, we cannot reject the hypothesis that decision makers behave according to the logit attention model (Brade and Rehbeck, 2016).

Suggested Citation

  • Victor H. Aguiar & Maria Jose Boccardi & Nail Kashaev & Jeongbin Kim, 2018. "Random Utility and Limited Consideration," Papers 1812.09619, arXiv.org, revised Jul 2022.
  • Handle: RePEc:arx:papers:1812.09619
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    Cited by:

    1. Valentino Dardanoni & Paola Manzini & Marco Mariotti & Christopher J. Tyson, 2020. "Inferring Cognitive Heterogeneity From Aggregate Choices," Econometrica, Econometric Society, vol. 88(3), pages 1269-1296, May.
    2. Alfio Giarlotta & Angelo Petralia, 2024. "Simon’s bounded rationality," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 47(1), pages 327-346, June.
    3. Gibbard, Peter, 2021. "Disentangling preferences and limited attention: Random-utility models with consideration sets," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    4. Nail Kashaev & Natalia Lazzati, 2019. "Peer Effects in Random Consideration Sets," Papers 1904.06742, arXiv.org, revised May 2021.
    5. Mark Dean & Dilip Ravindran & Jorg Stoye, 2022. "A Better Test of Choice Overload," Papers 2212.03931, arXiv.org, revised Jul 2024.
    6. Kovach, Matthew & Suleymanov, Elchin, 2023. "Reference dependence and random attention," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 421-441.
    7. Andrew Caplin & Daniel J. Martin, 2020. "Framing, Information, and Welfare," NBER Working Papers 27265, National Bureau of Economic Research, Inc.
    8. Wilfried Youmbi, 2024. "Nonparametric Analysis of Random Utility Models Robust to Nontransitive Preferences," Papers 2406.13969, arXiv.org.
    9. Changkuk Im & John Rehbeck, 2021. "Non-rationalizable Individuals, Stochastic Rationalizability, and Sampling," Papers 2102.03436, arXiv.org, revised Oct 2021.
    10. Georgios Gerasimou, 2020. "Decision Conflict, Logit, and the Outside Option," Papers 2008.04229, arXiv.org, revised Nov 2024.
    11. Martin Bustos, 2024. "Identification with Posterior-Separable Information Costs," Papers 2402.09789, arXiv.org.
    12. Roy Allen, 2024. "Exogenous Consideration and Extended Random Utility," Papers 2405.13945, arXiv.org.

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