Salience and consumer choice

We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's attributes, relative to that attribute's average level in the choice set (or generally, the evoked set). Consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality/price ratios. The model accounts for a variety of disparate evidence, including decoy effects, context-dependent willingness to pay, and large shifts in demand in response to price shocks.

Salience in Experimental Tests of the Endowment Effect

We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap.

Flux stabilization in compact groups

We consider the Born-Infeld action for symmetry-preserving, orientable D-branes in compact group manifolds. We find classical solutions that obey the flux quantization condition. They correspond to conformally invariant boundary conditions on the world sheet. We compute the spectrum of quadratic fluctuations and find agreement with the predictions of conformal field theory, up to a missing level-dependent truncation. Our results extend to D-branes with the geometry of twined conjugacy classes; they illustrate the mechanism of flux stabilization of D-branes.Comment: 13 pages, 1 figure. Comment and references adde

Salience and Experimental Tests of the Endowment Effect

We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap.Economic

Salience Theory of Judicial Decisions

We present a model of judicial decision making in which the judge overweights the salient facts of the case. The context of the judicial decision, which is comparative by nature, shapes which aspects of the case stand out and draw the judge’s attention. By focusing judicial attention on such salient aspects of the case, legally irrelevant information can affect judicial decisions. Our model accounts for a range of recent experimental evidence that bears on the psychology of judicial decisions, including anchoring effects in the setting of damages, decoy effects in choice of legal remedies, and framing effects in the decision to litigate. The model also offers a new approach to positive analysis of damage awards in torts

Salience and Consumer Choice

We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's attributes, relative to that attribute's average level in the choice set (or more broadly, the choice context). Consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality/price ratios. The model accounts for a variety of disparate evidence, including decoy eects and context-dependent willingness to pay. It also suggests a novel theory of misleading sales

Competition for Attention

We present a model of market competition and product differentiation in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. With salience, strategic positioning of each product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit "commoditized" price salient equilibria, while others exhibit "de-commoditized" quality salient equilibria. When the cost of producing quality changes, innovation can lead to a radical change in markets. In the context of financial innovation, the model generates the well documented phenomenon of "reaching for yield."Economic

Salience Theory of Choice Under Risk

We present a theory of choice among lotteries in which the decision maker's attention is drawn to (precisely defined) salient payoffs. This leads the decision maker to a context-dependent representation of lotteries in which true probabilities are replaced by decision weights distorted in favor of salient payoffs. By specifying decision weights as a function of payoffs, our model provides a novel and unified account of many empirical phenomena, including frequent risk-seeking behavior, invariance failures such as the Allais paradox, and preference reversals. It also yields new predictions, including some that distinguish it from prospect theory, which we test.Economic

Salience and Asset Prices

In Bordalo, Gennaioli and Shleifer (BGS 2012a), we described a new approach to choice under risk that we called salience theory. In comparisons of risky lotteries, we argued, individuals ’ attention is drawn to those payoffs which are most different or salient relative t