We propose a theory of choices that are influenced by the psychological state of the agent. The central hypothesis is that the psychological state controls the urgency of the attributes sought by the decision maker in the available alternatives. While state dependent choice is less restricted...

We model a boundedly rational agent who suffers from limited attention. The agent considers each feasible alternative with a given (unobservable) probability,the attention parameter, and then chooses the alternative that maximises a preference relation within the set of considered alternatives....

We model the choice behaviour of an agent who is vNM rational but imperfectly attentive. We define inattention axiomatically through preference over menus and endowed alternatives: an agent is inattentive if it is better to be endowed with an alternative a than to be allowed to pick a from a...

There are many situations in which alternatives ranked by quality wish to be chosen and compete for the imperfect attention of a chooser by selecting their own salience. The chooser may be “tricked" into choosing more salient but inferior alter- natives. We investigate when competitive forces...

We study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a ?consideration set?prior to choosing an alternative. Membership of the consideration set is determined both by the alternative speci?c salience and by the rationality of...

While Rational Expectations have dominated the paradigm of expectations formation, they have been more recently challenged on the empirical ground such as, for instance, in the dynamics of the exchange rate. This challenge has led to the introduction of heterogeneous expectations in economic...