Transitory shocks, limited attention, and a firm’s decision to exit
研究酒吧老板在决定是否退出时，可能因有限注意力而无法区分利润信号中的暂时性冲击，导致错误退出决策，造成福利损失。
Abstract This paper investigates the incidence of limited attention in a high-stakes business setting: a bar owner may be unable to purge transitory shocks from noisy profit signals when deciding whether to exit. Combining a 24-year monthly panel on the alcohol revenues from every bar in Texas with weather data, we find suggestive evidence that inexperienced, distantly located owners may overreact to the transitory component of revenue relative to the persistent component. This apparent asymmetric response is muted under higher revenue fluctuations. We formulate and estimate a structural model to endogenize attention allocation by owners with different thinking cost. Under the assumptions of the model, we find that 3.9% bars make incorrect exit decisions due to limited attention. As exits are irreversible, permanent decisions, small mistakes at the margin interpreting profit signals can lead to large welfare losses for entrepreneurs.