Salience theory
Attention is drawn to an outcome that stands out, and that outcome gets overweighted in choice.
What it means
Salience theory of choice under risk proposes that decision-makers overweight the states of the world in which an option's payoff is most salient — most different from the average payoff available in that state. Rather than distorting probabilities by their size, as prospect theory does, salience distorts them by context: the same probability gets more weight when its outcome is conspicuous relative to the alternatives. This context-dependence reproduces the Allais paradox, the fourfold pattern, and preference reversals, and it predicts that adding or removing options can change risk attitudes by shifting what stands out. The theory has been extended to consumer choice, where a salient attribute (a strikingly low price or high quality) draws disproportionate weight. It reframes probability weighting as a downstream consequence of attention rather than a primitive.
Examples
A lottery's tiny chance of a huge prize is overweighted because, against the everyday backdrop of small sums, the jackpot is the most salient outcome in the room.
Among similarly priced laptops, the one with double the battery life wins because that attribute stands out; set it beside a much cheaper model and price grabs the weight instead.
Buyers pay over the odds for extended warranties because the vivid state where the phone shatters is the one that stands out, so its small probability gets far more weight than it deserves.
First described in Bordalo, Gennaioli & Shleifer (2012).