Inattention to States and Characteristics

Chris Engh

Papers from arXiv.org

Abstract: We study a generalization of the state-action rational inattention model with two dimensions of uncertainty: states and hedonic characteristics. The resulting conditional choice probability takes a familiar weighted multinomial logit form, but in contrast to the state-action model, is unique and is not a corner solution. The model imposes testable restrictions on the behavior of choice probabilities in markets with product entry.

Date: 2025-08
New Economics Papers: this item is included in nep-dcm
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