Rational Inattention Dynamics: Inertia and Delay in Decision-Making

Jakub Steiner, Colin Stewart and Filip Matejka

Working Papers from University of Toronto, Department of Economics

Abstract: We solve a general class of dynamic rational-inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions. The solution resembles the choice rule in a dynamic logit model, but it is biased towards an optimal default rule that is independent of the realized state. The model provides the same fit to choice data as dynamic logit, but, because of the bias, yields different counterfactual predictions. We apply the general solution to the study of (i) the status quo bias; (ii) inertia in actions leading to lagged adjustments to shocks; and (iii) the tradeoff between accuracy and delay in decision-making.

Keywords: Rational inattention; stochastic choice; dynamic logit; information acquisition (search for similar items in EconPapers)
JEL-codes: D81 D83 D90 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2016-05-04
New Economics Papers: this item is included in nep-dcm, nep-dge, nep-pr~, nep-mic and nep-upt
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Related works:
Journal Article: Rational Inattention Dynamics: Inertia and Delay in Decision‐Making (2017)
Working Paper: Rational Inattention Dynamics: Inertia and Delay in Decision-Making (2015)
Working Paper: Rational Inattention Dynamics: Inertia and Delay in Decision-Making (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-559

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