What Is Limited Attention In Behavioral Economics?

Limited attention is a concept in behavioral economics that acknowledges the cognitive constraints individuals face when processing and acting upon information. Due to the finite capacity of human attention, people are unable to fully process all available information when making decisions, leading to simplified decision-making strategies or potential biases.

The concept of limited attention stems from research in cognitive psychology and has been integrated into behavioral economics as a way to explain deviations from traditional rational choice models. It is closely related to the concept of bounded rationality, introduced by Herbert A. Simon, which posits that decision-making is constrained by cognitive limitations and the availability of information.

Limited attention has significant implications for various domains, including finance, marketing, and public policy. It helps explain phenomena such as inattentional blindness, the focusing effect, and the prominence effect. The concept also informs the design of interventions, such as nudges and choice architecture, which aim to improve decision-making by accounting for attentional limitations and leveraging cognitive biases.

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