A theory of discrete choice with information costs

Anton Cheremukhin, Anna Popova and Antonella Tutino

Journal of Economic Behavior & Organization, 2015, vol. 113, issue C, 34-50

Abstract: We present a theory of discrete choice with information costs that supports deliberate stochastic choice. We use a unique experimental dataset to distinguish between errors arising from limitations on a decision maker's cognitive abilities and conscious disregard of information. Experimental evidence strongly favors the latter explanation. The data also allows us to directly estimate the shape and size of information costs for individual participants. Furthermore, in line with a dynamic extension of our theory, we find that accumulated knowledge of the environment improves response consistency.

Keywords: Bounded rationality; Information theory; Rational inattention; Discrete choice; Behavioral experiments (search for similar items in EconPapers)
JEL-codes: C44 C91 D03 D81 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:113:y:2015:i:c:p:34-50

DOI: 10.1016/j.jebo.2015.02.022

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