LIMITED_ATTENTION · Evolutionary, Social, and Strategic Aspects of limited Attention and Economic Policy Implications

Attention is a scarce cognitive resource. How economic agents allocate their LIMITED ATTENTION has profound implication for economic policy. Investors may not pay attention to differences in country specific default risks in sovereign debt until something triggers attention to this issue. Then we might change from a good equilibrium of sustainable debt to bad equilibrium of default. Consumers may not be able to pay attention to all details and become vulnerable to exploitation by strategic agents. Voters’ limited attention influences elections and ultimately public policies.This project seeks a deeper understanding of LIMITED ATTENTION and its economic consequences. Part 1 investigates the evolutionary foundations of limited attention, seeking a better understanding of the evolution of allocating limited attention. Furthermore, we consider in how far limited cognition can provided a framework for an evolutionary foundations of prospect theory, particularly for probability weighting. In addition, we investigate the evolution of paying attention to different characteristics. Part 2 focuses on social and strategic aspects of allocating limited attention and the implications for public policy. When is paying attention a strategic complement (i.e. you want to pay attention to an issue when others pay attention to it) and when a strategic substitute (i.e. if other pay attention to this issue, you can focus your attention on other things)? How might attentive players exploit inattentive players and how can inattentive agents protect themselves. A better understanding of these strategic aspects of limited attention will have important positive and normative implications for public policy and interesting applications as illustrated in the previous examples.The project is a crucial part of reintegrating the researcher into the European research network, facilitating joint work with his coauthors across Europe, and keeping his international connections and collaborations.