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Foundations for optimal inattention

Ellis, Andrew (2017) Foundations for optimal inattention. Journal of Economic Theory, 173. pp. 56-94. ISSN 1095-7235

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Identification Number: 10.1016/j.jet.2017.10.004

Abstract

This paper models an agent who has a limited capacity to pay attention to information and thus conditions her actions on a coarsening of the available information. An optimally inattentive agent chooses both her coarsening and her actions by maximization of an underlying subjective expected utility preference relation, net of a cognitive cost of attention. The main result axiomatically characterizes the conditional choices of actions by an agent that are necessary and sufficient for her behavior to be seen as if it is the result of optimal inattention. Observing these choices permits unique identification of the agent’s utility index, the information to which she pays attention, her attention cost and her prior whenever information is costly.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/00220...
Additional Information: © 2017 The Author CC BY-NC-ND 4.0
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Date Deposited: 13 Nov 2017 14:21
Last Modified: 20 Sep 2019 02:31
URI: http://eprints.lse.ac.uk/id/eprint/85334

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