Costly information and random choice

Jetlir Duraj () and Yi-Hsuan Lin ()
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Jetlir Duraj: University of Pittsburgh
Yi-Hsuan Lin: Institute of Economics, Academia Sinica

Economic Theory, 2022, vol. 74, issue 1, No 5, 135-159

Abstract: Abstract Consider an agent who decides whether to employ an information structure to learn about a payoff-relevant state of the world before making a decision. Information is costly either because (1) the agent has to wait some time until the information structure becomes available and is impatient, or because (2) she has to pay a fixed and menu-independent cost to use the information structure. For each menu of options the analyst observes random choice from the menu and whether the agent acquires the information. We give an axiomatic characterization of when this random choice is consistent with either of the cases (1) or (2). We identify the information structure the agent can employ, as well as its costs. We also discuss implications of our approach for sequential sampling.

Keywords: Information acquisition; Random choice; Identification; Discounting (search for similar items in EconPapers)
JEL-codes: D01 D81 D83 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00199-021-01361-w

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