DP13268 Behavioral Inattention

Author(s): Xavier Gabaix
Publication Date: October 2018
Keyword(s):
JEL(s):
Programme Areas: Public Economics, Financial Economics, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13268

Inattention is a central, unifying theme for much of behavioral economics. It permeates such disparate fields as microeconomics, macroeconomics, finance, public economics, and industrial organization. It enables us to think in a rather consistent way about behavioral biases, speculate about their origins, and trace out their implications for market outcomes. This survey first discusses the most basic models of attention, using a fairly unified framework. Then, it discusses the methods used to measure attention, which present a number of challenges on which a great deal of progress has been achieved, although much more work needs to be done. It then examines the various theories of attention, both behavioral and more Bayesian. It finally discusses some applications. For instance, inattention offers a way to write a behavioral version of basic microeconomics, as in consumer theory and Arrow-Debreu. A last section is devoted to open questions in the attention literature. This chapter is a pedagogical guide to the literature on attention. Derivations are self-contained.