Rational Inattention: A Review

Bartosz Maćkowiak, Filip Matejka and Mirko Wiederholt

Journal of Economic Literature, 2023, vol. 61, issue 1, 226-73

Abstract: We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they can choose which exact pieces of information to attend to. Several important results in economics have been built around imperfect information. Nowadays, many more forms of information than ever before are available due to new technologies, and yet we are able to digest little of it. Which form of imperfect information we possess and act upon is thus largely determined by which information we choose to pay attention to. These choices are driven by current economic conditions and imply behavior that features numerous empirically supported departures from standard models. Combining these insights about human limitations with the optimizing approach of neoclassical economics yields a new, generally applicable model.

JEL-codes: D83 D91 E71 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (70)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/jel.20211524 (application/pdf)
https://www.aeaweb.org/doi/10.1257/jel.20211524.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Rational Inattention: A Review (2023)
Working Paper: Rational Inattention: A Review (2023)
Working Paper: Rational inattention: a review (2021)
Working Paper: Rational Inattention: A Review (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jeclit:v:61:y:2023:i:1:p:226-73

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/jel.20211524

Access Statistics for this article

Journal of Economic Literature is currently edited by Steven Durlauf

More articles in Journal of Economic Literature from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().