Title: Inferring Cognitive Heterogeneity from Aggregate Choices
Abstract: We study the problem of recovering the distribution of cognitive characteristics in a population of boundedly rational agents from their aggregate choices. In contrast to much of the theoretical literature on bounded rationality, we make use of choices from a fixed menu of alternatives rather than from a rich collection of menus. We examine in detail two models of choice with limited attention, and we show that both “consideration probability” and “consideration capacity” distributions are substantially identified by aggregate choice shares. These two models are applied to data on over-the-counter painkiller sales, yielding concurrent estimates that on average two or three out of the eight available products are considered in this market. We also demonstrate how our framework can be used “counterfactually” for welfare analysis.
Publication Year: 2017
Publication Date: 2017-05-25
Language: en
Type: preprint
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Cited By Count: 3
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