Random Network Consideration : Theory and Experiment

In many settings, it is natural to think of limited consideration exhibiting spillovers: attention paid to a particular alternative may “spill over” to another alternative based on shared characteristics, complementarities, features of the choice environment, shared advertising campaigns, product bundling, etc. Limited consideration of this form gives rise to new methods of revealing preferences and attention. Using a novel laboratory experiment, I test a deterministic Network Choice model proposed in previous work and find a plethora of violations thereof, even at the individual level. I then propose a stochastic model, Random Network Choice, and analyze its properties regarding the formation of consideration sets. When applied to the laboratory data, I find considerable consistency with the general Random Network Choice model. Armed with a model of network choice consistent with my experimental data, I consider one application in the realm of advertising to show that such a generalization of so-called “positive spillovers” in attention is necessary to avoid misleading welfare analysis