The Cost of Optimally Acquired Information

Alexander W. Bloedel and Weijie Zhong

Papers from arXiv.org

Abstract: This paper introduces a framework for modeling the cost of information acquisition based on the principle of cost-minimization. We study the reduced-form \emph{indirect cost} of information generated by the sequential minimization of a primitive \emph{direct cost} function. Indirect cost functions: (i) are characterized by a novel recursive property, \emph{sequential learning-proofness}; (ii) provide an optimization foundation for the popular class of ``uniformly posterior separable'' costs; and (iii) can often be tractably calculated from their underlying direct costs. We apply the framework by identifying fundamental modeling tradeoffs in the rational inattention literature and two new indirect cost functions that balance these tradeoffs.

Date: 2025-11
New Economics Papers: this item is included in nep-inv and nep-mic
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