I propose a procedural model of random choice called visual choice based on the eye movements of individuals. 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, both formulated using the well-known Luce rule. I discuss the cases of fixation-independent and fixation-dependent saccades. The former connects to the recent literature extending the Luce rule giving a procedural interpretation for these choice rules. For the latter, I discuss a special case called satisficing visual choice which determines the choice probability of an alternative x by calculating the weighted average of the contribution coming from the fixated alternatives strictly dominated by x. The main results of the model are related to the rationality properties of this procedure, and a behavioral characterization result based on conditions imposed on the choice data.
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Market Power with Limited Attentive Population
We study two market scenarios in which firms face a population of consumers with limited attention. A consumer considers each product with a certain probability, called the attention parameter, which determines the aggregate choice probabilities of the alternatives offered in the market. Firms know the distribution of this parameter in the population. We first consider the scenario of a single firm facing no competition, and then a market this firm becomes the default seller for all consumers but faces competition of another firm. We are interested in the consequences of limited attention of the consumers and initial market share on the market outcomes such as the market power of firms measured by their profits, the variety and quality of products offered, and the welfare of the consumers. We discuss ways to incorporate the pricing decision and different specifications of the attention parameter, the latter demonstrating that the market implications depend on the determinants of attention.
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Market Complexity with Asymmetric Firms
I present a model of the interaction between a population of identical consumers who finds some markets complex and two rational firms maximizing their payoff functions. The firms know how the consumers behave in different markets: All consumers choose the best product according to their preferences when the market is easy, and purchase a product their default firm offers when it is hard. Both firms in the duopoly have a certain share of consumers having them as their default, potentially representing the market power or the salience of the firm. I analyze two cases: symmetric firms having equal power, and asymmetric firms with different market powers and some but not all markets are hard. Two special structures are imposed on the hard markets: In the complex product setting, a market is hard for the consumer if and only if it includes at least one complex product. The second structure is limited attention setting, where I assume the market is hard for the consumer whenever it contains more than a certain number of products. I investigate the equilibrium behavior under these settings and discuss the market implications of public policies such as educating the consumers. I then generalize the model by introducing imperfect information about the cognitive characteristics of the consumers and later competition. I conclude by discussing the relation to the literature, and the effects of changing the determinants of complexity.
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