Chew Soo Hong (University of British Columbia)

Abstract: We model the role of attention in decision making under risk and
uncertainty from the perspective of the decision maker as a cognitive
miser, and arrive at the utility of a lottery through potentially
volatile attention-dependent decision weights. The resulting Attention
Theory (AT) can account for a broad range of choice phenomena in the
literature under different attentional attitudes. Under
consequentialist attention, AT exhibits continuity in decision weights
and can account for Allais behavior, fourfold pattern of risk
attitude, and disjunction effect. Under a weaker form of
consequentialist attention which accommodates a variable attention
function, AT can exhibit ambiguity aversion, discontinuity in
valuation from event splitting, and uncertainty effects. When
bottom-up salience is significant, AT delivers instability in loss
aversion, source dependence, and stochastic choice from excessive
inattention when bottom-up salience is random. In binary choice, AT
delivers a class of correlation preference which overlaps
substantially with regret theory (top-down), and reduces to salience
theory (bottom-up) when the bivariate attention function is symmetric.
Stochastic binary choice follows under excessive inattention.