The Economics of Attention: A Valuable Commodity That's Hard to Measure
The new scarce resource is attention, notes Marketing Professor Milica Mormann of ҽCox. "We live in an attention economy, and our attention is limited." Through a multi-disciplinary approach, Mormann and co-author Cary Frydman reveal how attention is operating to influence economic choices in their novel research. "Attention is the step that leads a manager or consumer toward an action," she states. "We know we have about eight seconds to deliver a message on social media, in a TV ad, or for an investing decision or health care choice. But we do not know exactly how attention operates, in spite of the industry performing studies to gauge attention."
Through a multi-disciplinary approach, Mormann and co-author Cary Frydman reveal how attention is operating to influence economic choices in their novel research. "Attention is the step that leads a manager or consumer toward an action," she states.
Mormann's research focus on judgment and decision-making in an information- cluttered world led her back to the importance of attention. More recently, Microsoft has quantified the attention span of people in research: it's about 8 seconds, declining from 12 seconds in 2000. "If you are in a store, on a web page, or making a sales pitch, people will give you eight seconds, and decide whether to engage with you— or move on," says Mormann.
Attention is important in driving economic choice, Mormann notes from her research. In fact, the scarcity of attention and its crucial role in influencing our behavior was first pointed out in 1955 by Nobel prizewinner Herbert Simon, the father of attention economics. "We know it is important, but there is very little empirical research because it is hard to measure," Mormann conveys. "We know we have about eight seconds to deliver a message on social media, in a TV ad, or for an investing decision or health care choice. But we do not know exactly how attention operates, in spite of the industry performing studies to gauge it."
Measuring attention
In her co-authored paper, the fields of marketing, economics and neuroscience combine to see how attention influences decision-making, or choice. Mormann was recently invited to present her research at a New York University workshop* on attention and choice, where a select, global group of cognitive and economic scientists were convened to present their trailblazing theories and findings.
The authors conducted three experiments using a combination of lottery choices and eye-tracking data to test the role of "salience" and attention in risky choice. For example, manipulating a subject’s attention towards a consumer item, thus making it visually prominent, increases the probability that it is chosen. In academic speak, this would be considered "visual salience." For example, a lottery payoff is likely to be "visually salient" if it is displayed in a black font against a bright yellow background.
"We look at how visual features [their salience] influence downstream choice," Mormann says about the research. "We then translate the effects of visual salience into how we make a decision under uncertainty, or in a state of risk." "Economic salience" is whether something has more value, that is, a payoff is seen as salient if its magnitude is very different in percentage terms from other lottery payoffs. Simply put, values and prices —whether they are 0, $1 or $10 —matter.
However, when comparing economic choices, it also matters how they are displayed; for example, if a loss is presented in a bold font, it increases risk aversion more than if one described the loss in a paragraph. "We see this type of multiplication of perception of some low-level feature that in theory should not matter," says Mormann about the research.
In the study, the authors test whether economic salience affects risk taking. Like prior research, they found that a decision maker is more willing to take risk when a lottery’s upside (i.e., potential gain) is economically salient compared to when its downside (i.e., potential loss) is salient. In other words, manipulating the economic salience of payoffs has a sizeable effect on risk taking and ultimately influences choice.
Additionally, the authors test how visual salience affects risk taking. Mormann's earlier research has shown that when choosing among several consumer items, subjects fixate for a longer period of time on the visually salient item, as highlighted by its color, contrast, and orientation. While visual features affect how a person allocates attention, it had been unclear whether this, in turn, would affect risk taking.
The authors found that when the gains of the lottery were made visually salient and subjects thus focused on it, they were more likely to make a risky choice. That is, the more they look at the gain, the more they are willing to take risk. This visual salience translated into offering them $7 of economic value, or a 6% increase in risk taking from the control condition to the gain treatment. "We quantified the exact increase in salience in dollar terms," Mormann notes.
In the study, visual salience was shown to have a systematic effect on risk taking. "We found that economic salience is multiplied by visual salience," Mormann explains. "Visual features, like bold or red-highlighted values, magnify economic salience, which then motivates behavior."
The authors' research contributes to the growing literature in neuroeconomics. Marketers would be wise to consider the implications. The findings support the idea that attention is an important factor in driving economic choice or behavior. Importantly, the studies provide novel evidence that attention directly affects risk taking. Attention matters.
The paper "The Role of Salience and Attention in Choice Under Risk: An Experimental Investigation" by Milica Mormann of ҽMethodist University's Cox School of Business and Cary Frydman of University of ҽCalifornia is under review.
* The Sloan-Nomis 2018 Workshop on Attention and Choice, New York University, February 23-24, 2018.
Written by Jennifer Warren.
