Foundations for optimal inattention

Andrew Ellis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: inattention; optimal inattention; conditional choice (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Date: 2017-10-23
New Economics Papers: this item is included in nep-mic, nep-neu, nep-ore and nep-upt
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Published in Journal of Economic Theory, 23, October, 2017, 173, pp. 56-94. ISSN: 1095-7235

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http://eprints.lse.ac.uk/85334/ Open access version. (application/pdf)

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Journal Article: Foundations for optimal inattention (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:85334

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