Having outlined a framework under which costs of processing information can generate the
consumer inattention we observe in the data, we move on to specify a simple two-stage model
of consumer decision-making for estimation. Consistent with the framework just developed, we
abstract away from risk aversion and learning and assume that consumers are myopic in their
choice of plans. We distinguish between two possible unobserved sources of choice persistence:
persistent variation in unobserved preferences and inattention. We account for inattention using
the following simple framework. We assume that each consumer ignores the plan choice problem
until hit by a shock to the OOP costs of her current plan or to her health. These shocks are assumed
to have additively separable eects on her decision to re-optimize her choice of plan. If she chooses
to re-optimize, she makes choices according to a utility equation to be estimated. We will use
this simple decision model to predict the behaviors that will aect the optimal plan strategies