An equivalence between rational inattention problems and complete-information conformity games

Pavel Ilinov and Ole Jann

Economics Letters, 2022, vol. 214, issue C

Abstract: We consider two types of models: (i) a rational inattention problem (as known from the literature) and (ii) a conformity game, in which fully informed players find it costly to deviate from average behavior. We show that these problems are equivalent to each other both from the perspective of the participant and the outside observer: Each individual faces identical trade-offs in both situations, and an observer would not be able to distinguish the two models from the choice data they generate. We also establish when individual behavior in the conformity game maximizes welfare.

Keywords: Conformity; Equivalence; Rational inattention; Social norms (search for similar items in EconPapers)
JEL-codes: D81 D83 D91 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: An Equivalence between Rational Inattention Problems and Complete-Information Conformity Games (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:214:y:2022:i:c:s0165176522000957

DOI: 10.1016/j.econlet.2022.110444

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