Abstract: We develop a dynamic model of discrete choice that incorporates peer effects into random consideration sets. We characterize the equilibrium behavior and study the empirical content of the model. In our setup, changes in the choices of friends affect the distribution of the consideration sets. We exploit this variation to recover the ranking of preferences, attention mechanisms, and network connections.
These nonparametric identification results allow unrestricted heterogeneity across people and do not rely on the variation of either covariates or the set of available options. We apply our results to an experimental dataset that has been designed to study the visual focus of attention. We find robust left-to-right bias and positive peer effects in gazing.
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