Content area
Abstract
In this dissertation, I model individuals who have limited attention due to different reasons and the impact of this on the market competition. I propose three theoretical models two of which involve different types of attention formation discussing the implied choice behavior, and another model that analyzes firms behavior in a market populated with limited attentive consumers. In Chapter 1, I define a stochastic choice rule based on the eye movements of individuals, which determines the alternatives that are paid attention by the individual. The decision maker fixates randomly on alternatives and performs saccades to other alternatives based on the fixation point. The choice probabilities are determined using a random tie-breaking between these saccaded alternatives and weighting according to the fixation probabilities. In Chapter 2, decision-makers are influenced by their social environment when making choices, which is modeled using the notion of socially acceptable alternatives that determines what is paid attention to. We study two potential scenarios in which the choices are distorted by social influence where the social groups serve as tie-breakers in the first case, while in the second case, they become more influential in shaping the preferences to conform to social preferences. Finally, I introduce a model in which a firm considers entering a market with a population of limited attentive consumers and a powerful incumbent where no specific attention formation process is assumed. The power of the incumbent comes from the share of inattentive consumers who are not considering alternatives offered in the market and buy from the incumbent.
