Completing Incomplete Revealed Preference under Limited Attention

Yusufcan Masatlioglu and Daisuke Nakajima , The Japanese Economic Review 66(3) , 285-299 , September 2015.

This paper discusses how to improve the identification of the preference of a decision-maker (DM) with limited attention proposed by Masatlioglu, Nakajima and Ozbay (2012). in “Revealed Attention”. Their identification method relies on choice reversals so the obtained revealed preference is often incomplete. We propose three approaches to address this problem. The first one is accommodating a model-free approach, which respects the DM's choice in making a welfare analysis, as long as it does not contradict the revealed preference of Masatlioglu et al. The second approach incorporates the DM's exogenously obtained attention/inattention information into the model of Masatlioglu et al. The third approach is to take framings that influence the DM's attention into effect for the identification.

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