Costly subjective learning

Youichiro Higashi, Kazuya Hyogo and Norio Takeoka

Journal of Economic Theory, 2025, vol. 226, issue C

Abstract: We examine the behavioral foundation of rational inattention within a menu-choice framework. Unlike previous studies, our approach enables the unique identification of nonadditive information costs. The nonadditivity of information costs makes the effective cost inherently dependent on benefits of information. In contrast to additive cost models, this feature may lead to a violation of the preference for early resolution of menu uncertainty. Early resolution is typically preferable as it allows the agent to fine-tune information for relevant menus. However, if the effective cost function is convex in benefits of information, late resolution may reduce the effective information costs. The violation occurs when this cost-reduction effect outweighs the benefits of early resolution.

Keywords: Information acquisition; Rational inattention; Preference for the timing of the resolution of uncertainty; Preference over menus (search for similar items in EconPapers)
JEL-codes: D11 D81 D91 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:226:y:2025:i:c:s0022053125000432

DOI: 10.1016/j.jet.2025.105997

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