EconPapers    
Economics at your fingertips  
 

Discrete Choice and Rational Inattention: A General Equivalence Result

Mogens Fosgerau (), Emerson Melo, André de Palma () and Matthew Shum ()
Additional contact information
Emerson Melo: Indiana University [Bloomington]

Working Papers from HAL

Abstract: This paper establishes a general equivalence between discrete choice and rational inattention models. Matejka and McKay (2015, AER) showed that when information costs are modelled using the Shannon entropy function, the resulting choice probabilities in the rational inattention model take the multinomial logit form. By exploiting convex-analytic properties of the discrete choice model, we show that when information costs are modelled using a class of generalized entropy functions, the choice probabilities in any rational inattention model are observationally equivalent to some additive random utility discrete choice model and vice versa. Thus any additive random utility model can be given an interpretation in terms of boundedly rational behavior. This includes empirically relevant specifications such as the probit and nested logit models.

Keywords: convex analysis; generalized entropy; rational inattention; discrete choice; random utility (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-tre and nep-upt
Date: 2017-04-07
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01501313
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01501313/document (application/pdf)

Related works:
Working Paper: Discrete Choice and Rational Inattention: a General Equivalence Result (2017) Downloads
Working Paper: Discrete Choice and Rational Inattention: a General Equivalence Result (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-01501313

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2018-06-20
Handle: RePEc:hal:wpaper:hal-01501313