Attention Overload

We introduce an Attention Overload Model that captures the idea that alternatives compete for the decision maker's attention, and hence the attention that each alternative receives decreases as the choice problem becomes larger. Using this nonparametric restriction on the random attention formation, we show that a fruitful revealed preference theory can be developed and provide testable implications on the observed choice behavior that can be used to (point or partially) identify the decision maker's preference and attention frequency. We then enhance our attention overload model to accommodate heterogeneous preferences. Due to the nonparametric nature of our identifying assumption, we must discipline the amount of heterogeneity in the choice model: we propose the idea of List-based Attention Overload, where alternatives are presented to the decision makers as a list that correlates with both heterogeneous preferences and random attention. We show that preference and attention frequencies are (point or partially) identifiable under nonparametric assumptions on the list and attention formation mechanisms, even when the true underlying list is unknown to the researcher. Building on our identification results, for both preference and attention frequencies, we develop econometric methods for estimation and inference that are valid in settings with a large number of alternatives and choice problems, a distinctive feature of the economic environment we consider. We also provide a software package in R implementing our empirical methods, and illustrate them in a simulation study.