Traditional economic theory rests on the assumptions of stable preferences and the rationality of the decision-makers. But these assumptions are often violated in practice. Recently, a growing literature has argued that limited attention of decision-makers could explain these violations.
The Improving Welfare by Increasing Attention project investigated whether limited attention is the mechanism underlying behavioral irrationality and whether decisions and economic welfare can be improved by increasing attention.
Through a combined theoretical and experimental line of research, the investigators aimed to develop novel measures of rationality that can be applied to choice under uncertainty and asked how these measures relate to theories of limited attention. A major goal was to measure the rationality of choices separately from preferences. The empirical aspect of the project explored the effects of attention-modulating pharmacological interventions on choice under uncertainty and its neural basis. The researchers aimed to develop tools that could enable the identification of the precise channel by which the interventions affect choice behavior and to assess whether attention-increasing interventions increase decision quality.
The project constituted a rare occasion in which economics and neuroscience can together provide a better understanding of behavioral rationality. In addition to providing a direct test to understand whether limited attention is the mechanism underlying behavioral irrationality, the project sought to enable the development of a toolkit to quantify deviations from rationality due to limited attention, opening up a behavioral welfare approach specific to choice under uncertainty.
The Improving Welfare by Increasing Attention project was led by Nick Netzer and Philippe Tobler at the University of Zurich (Switzerland) and was supported in collaboration with the Alfred P. Sloan Foundation.
