Rational Inattention and Rate Distortion Theory: A Teaching Note

Tommaso Denti, Massimo Marinacci and Luigi Montrucchio

No 630, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: In this teaching note we discuss the relation between rational inattention and a major branch of information theory called ?rate distortion theory.? Focusing on methods, we translate tools from rate distortion theory into the language of rational inattention. These tools provide an alternative, more primitive, approach to the study of optimal attention allocation.

Date: 2018
New Economics Papers: this item is included in nep-upt
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