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Salience

Author

Listed:
  • Pedro Bordalo
  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

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.

Suggested Citation

  • Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2021. "Salience," NBER Working Papers 29274, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29274
    Note: AP PE
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    JEL classification:

    • D0 - Microeconomics - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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