Abstract
Providing people with more information and more options may seem as a good policy. However, because of limited attention and cognitive resources, people are not able to use all available information and freedom of choice effectively to achieve their own best interests. When cognitive resources and attention are depleted, decision making becomes shallow and intuitive, often unable to take important aspects of given situations into account – even though this information is readily available. An intuitive decision making may lead to suboptimal outcomes by overestimating the importance of the most salient cues and disregarding the less obvious future consequences. Although this creates a demand for decision making aides that could be satisfied by markets, policy regulation may be necessary in some areas. We provide specific examples of problems arising from limited attention together with solutions based on behavioral economics approach to policy making known as nudging.
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