Heuristic Thinking and Limited Attention in the Car Market
Open accessAbstract
Can heuristic information processing affect important product markets? Analyzing over 22 million wholesale used-car transactions, we find evidence of left-digit bias in the processing of odometer values, whereby individuals focus on the number's leftmost digits. The bias leads to discontinuous drops in sale prices at 10,000-mile odometer thresholds, along with smaller drops at 1,000-mile thresholds. These findings reveal that information-processing heuristics matter even in markets with large stakes and easily observed information. We model left-digit bias in an inattention framework and structurally estimate the inattention parameter. Empirical patterns suggest the results are driven by final customers rather than professional agents. (JEL D12, D44, D83, L81)
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Just-below pricing exploits a heuristic wherein decisionmakers focus disproportionately on the leftmost integer while ignoring fractional cents.
“Just-below pricing (e.g., pricing an item at $4.99 rather than $5.00) exploits a heuristic wherein decisionmakers focus disproportionately on the leftmost integer while ignoring fractional cents (Bizer and Schindler, 2005;Thomas and Morwitz, 2005;Kraft and Rao, 2026;Lacetera et al., 2012).”
From Shopping by algorithm: How agentic AI deploys human heuristics as a surrogate consumer (2026) · cites this paper as Lacetera et al., 2012
Cites
Does Market Experience Eliminate Market Anomalies?
List, J. A. (2003) · The Quarterly Journal of Economics · doi:10.1162/00335530360535144 · Cited by 1,183 · see citing works
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Choi, S., Kariv, S., Müller, W., & Silverman, D. (2014) · American Economic Review · doi:10.1257/aer.104.6.1518 · Cited by 277 · see citing works
A citywide experiment testing the impact of geographically targeted, high-pay-off vaccine lotteries
Milkman, K. L., Gandhi, L., Ellis, S. F., Graci, H. N., Gromet, D. M., Mobarak, R. S., Buttenheim, A. M., Duckworth, A. L., Pope, D., Stanford, A., et al. (2022) · Nature Human Behaviour · doi:10.1038/s41562-022-01437-0 · Cited by 44 · see citing works
Self-citationShopping by algorithm: How agentic AI deploys human heuristics as a surrogate consumer
Wadi, D., & Ma, Y. (2026) · arXiv · doi:10.48550/arxiv.2609.28372
- Authors
- Lacetera, N., Pope, D. G., & Sydnor, J. R.
- Affiliations
- University of Toronto (CA)
- University of Chicago (US)
- University of Wisconsin System (US)
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2012-08-01
- Volume
- 102
- Issue
- 5
- Pages
- 2206-2236
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W3122194086
- Cited by
- 344
- References
- 1
- Citations by year
- 2026: 20 · 2025: 38 · 2024: 32 · 2023: 30 · 2022: 36 · 2021: 30 · 2020: 27 · 2019: 20 · 2018: 24 · 2017: 19 · 2016: 18 · 2015: 13 · 2014: 13 · 2013: 14 · 2012: 5
- FWCI
- 10.15
- Type
- journal article
- Language
- en
- Open access
- green
- doi.org
- Locations
- American Economic Review (publishedVersion)
- SSRN Electronic Journal (acceptedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Archivio istituzionale della ricerca (Alma Mater Studiorum Università di Bologna) (submittedVersion)
- Topics
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Social Sciences › Decision Sciences › Management Science and Operations Research › Auction Theory and Applications
- Keywords
- limited attention, used car market, left-digit bias, inattention, purchase decision
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