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Revealed Preference, Rational Inattention, and Costly Information Acquisition

Andrew Caplin and Mark Dean ()

American Economic Review, 2015, vol. 105, issue 7, 2183-2203

Abstract: Apparently mistaken decisions are ubiquitous. To what extent does this reflect irrationality, as opposed to a rational trade-off between the costs of information acquisition and the expected benefits of learning? We develop a revealed preference test that characterizes all patterns of choice "mistakes" consistent with a general model of optimal costly information acquisition and identify the extent to which information costs can be recovered from choice data. (JEL D11, D81, D83)

JEL-codes: D11 D81 D83 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20140117
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