We review the fast-growing work on salience and economic behavior. Psychological
research shows that salient stimuli attract human attention bottom up due to their high …

This chapter surveys the literature on behavioral industrial organization, covering four broad
topics:(1) how rational firms interact with consumers who make systematic mistakes in …

Inattention is a central, unifying theme for much of behavioral economics. It permeates such
disparate fields as microeconomics, macroeconomics, finance, public economics, and …

Nudges influence behavior by changing the environment in which decisions are made,
without restricting the menu of options and without altering financial incentives. This paper …

Economic models of decision making assume that people have a stable way of thinking
about value. In contrast, psychology has shown that people's preferences are often …

Building on a textbook description of associative memory, we present a model of choice in
which a choice option cues recall of similar past experiences. Memory shapes valuation and …

This article shows that accounting for variation in mistakes can be crucial for welfare
analysis. Focusing on consumer under-reaction to not-fully-salient sales taxes, we show …

We find that daily air pollution levels have a significant effect on the decision to purchase or
cancel health insurance in a manner inconsistent with rational choice theory. A one standard …

Consumers suffer significant losses from not acting on available information. These losses
stem from frictions such as search costs, switching costs, and rational inattention, as well as …

This paper develops a theory of optimal taxation with behavioral agents. We use a general
framework that encompasses a wide range of biases such as misperceptions and …