Abstract:
We present a theory of context-dependent choice in which a consumer’s
attention is drawn to salient attributes of goods, such as quality
or price. An attribute is salient for a good when it stands out among the
good’s attributes relative to that attribute’s average level in the choice
set ðor, more broadly, the choice contextÞ. Consumers attach disproportionately
high weight to salient attributes, and their choices are tilted
toward goods with higher quality/price ratios. The model accounts for
a variety of disparate evidence, including decoy effects and contextdependent
willingness to pay. It also suggests a novel theory of misleading
sales.