# On Machina’s paradoxes and limited attention

Research Article

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## Abstract

Limited attention and similarity of some of the states of the world together may nudge an agent to perceive the “grand world” as a collection of “small worlds”. We use this idea as an explanation for some of the ambiguity paradoxes posed by Machina (Am Econ Rev 99(1):385–392, 2009; Am Econ Rev 104(12):3814–3840, 2014) as a challenge to the prominent ambiguity theories. In addition, we propose a measure of rationality based on a number of potential violations of preference for the first-order stochastic dominance. We use this measure to explore how departures from perfect attention can be improved through changes to the structure of the “small worlds”.

## Keywords

Limited attention Ambiguity paradoxes Uncertainty State aggregation FOSD violations## JEL Classification

D91 D81 D11## Notes

### Compliance with ethical standards

### Conflict of interest

The author declares that she has no conflict of interest.

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© Society for the Advancement of Economic Theory 2019