Limited attention costs: Sometimes driving a mile costs $200
Nicola Lacetera, Devin Pope, Justin Sydnor 20 May 2011
People like to take shortcuts and this affects how we make decisions. Looking at auctions of more than 22 million used cars in the US, this column finds that buyers will often only pay attention to the first few digits of mileage. So if you have driven your car 30,000 miles, you might have to sell it for $200 less than if you had driven in 29,999 miles.
Imagine that you are in the process of buying a used car. You are considering a three-year-old Honda Accord, with 42,187 miles, and a five-year-old Toyota Camry, with 67,812 miles.
Now, close your eyes and try to remember the exact mileage of the two cars.
Chances are that you will recall the mileage of the Accord to be 42,000, or even 40,000, and the mileage on the Camry to be 67,000, or even 60,000.
Frontiers of economic research
auctions, decision making, memory