Bordalo, Gennaioli, Lanzani, and Shleifer develop a cognitive theory of choice in which a decision maker's attention to the features of options is determined by her categorization of the current …
This paper incorporates diagnostic expectations — beliefs that overweight the representativeness of recent data, formalized as $E_t^\theta(A_{t+1}) = E_t(A_{t+1}) + \theta[E_t(A_{t+1}) - …