Arna Olafsson, Michaela Pagel, 07 August 2018

Theories of rational inattention argue that individuals incur costs when they look for information, and that they compare these costs with the expected benefits from that information. This column uses empirical evidence on online logins to bank accounts to show that in this context, attention tends to be selective – subject to an 'ostrich effect' that avoids the discovery of bad news, for example – rather than rational. This selective attention may intensify individual financial problems such as debt traps.

Christian Helmers, Pramila Krishnan, Manasa Patnam, 25 January 2016

The growth of e-commerce has seen an enormous increase in the choice of products available online. With recent evidence from psychology suggesting that too much choice can impede decision making, this column examines whether consumers’ online choices are consistent with models of limited attention. High-frequency, transaction-level data from an online retail store reveal that consumers are influenced by recommendations. This suggests consumers do indeed have limited attention and simplify decision making by focusing on a subset of available products.

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