Persistence, patience and costly information acquisition

Benjamin Davies

Papers from arXiv.org

Abstract: A forward-looking agent observes signals of a state that follows a Gaussian AR(1) process. He balances the cost of having imprecise beliefs with the cost of acquiring more precise signals. I characterize his optimal information acquisition policy, and analyze how his steady-state beliefs and costs depend on persistence (the AR(1) parameter) and patience (the agent's discount factor). Higher persistence has a non-monotone effect on belief precision and raises overall costs. Higher patience makes beliefs more precise and lowers overall costs.

Date: 2026-03, Revised 2026-04
New Economics Papers: this item is included in nep-des and nep-mic
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