When more is less: Limited consideration

Abstract

There is well-established evidence that decision makers consistently fail to consider all available options. Instead, they restrict attention to only a subset of alternatives and then undertake a more detailed analysis of this reduced set. This systematic lack of consideration of available options can lead to a “more is less” effect, where excess of options can be welfare-reducing for a decision-maker (DM). Building on this idea, we model individuals who might pay attention to only a subset of the choice problem presented to them. Within this smaller set, a DM is rational in the standard sense, and she chooses the maximal element with respect to her preference. We provide a choice theoretical foundation for our model. In addition, we show which alternatives are revealed preferred to which and discuss welfare implications.