Revealed Attention and Memory

Abstract

We study how the allocation of attention to different options and the accessibility of options from memory affect decision making. To distinguish between attention and memory, we propose a two-stage stochastic consideration set formation process. An alternative enters the decision maker’s consideration set if it is investigated in the initial attention stage and it is remembered in the subsequent recall stage. In the initial attention stage, the decision maker investigates each available alternative with some alternative-specific probability. In the recall stage, the decision maker recalls each alternative that she investigated in the attention stage with some probability. The probability of recalling an alternative depends on the memorability of the alternative and its position in the order of investigation in the attention stage. Investigating an alternative more recently enhances the probability of recalling it. The decision maker chooses the option that maximizes her preference relation over her consideration set. Under the assumption that the investigation of alternatives is observable, we provide testable implications and show that the revealed preference, attention parameters and memory parameters can be uniquely identified from observable repeated choices.