Memory, Attention and Choice

We present a theory of consumer choice that combines elements of limited recall and of allocationof attention distorted by salience. The theory helps clarify and organize a variety of evidence dealingwith consumer reaction to information, including surprises in quality and prices, unshrouding ofhidden attributes such as taxes or maintenance costs, and reminders. Our model explains howconsumers under or overreact to information, depending on what draws their attention. It also yieldsa normative analysis of reaction to reminders which adjusts the \sucient statistic" methodology.