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.