Unlike standard models of choice, experimental evidence suggests that individuals avoid tradeoffs when choice problems are complex. I analyze the implications of consumers using noncompensatory choice heuristics in a simple Stackelberg game in which firms offer menus of multi-attribute alternatives and influence the attribute considered to be salient by consumers via marketing. I illustrate that there is a tight link between optimal menu design and marketing strategies in equilibrium and briefly discuss the choice-theoretic properties of the consumer's choice procedure.
Bibliographical noteI would like to thank Ran Spiegler for his helpful suggestions. I am also grateful to Miguel Angel Ballester, Johannes Hoerner, Philippe Jehiel, Erika Magnago, Paola Manzini, Marco Mariotti, William Neilson, an anonymous referee, the editor Nicholas C. Yannelis, and the seminar audience at Aberdeen and UCL for their comments. Any error is my own responsibility.
- bounded rationality
- Noncompensatory choice heuristics