Revealed Preference, Rational Inattention, and Costly Information Acquisition
Andrew Caplin () and
Mark Dean ()
No 19876, NBER Working Papers from National Bureau of Economic Research, Inc
We develop a revealed preference test for optimal acquisition of costly information. The test encompasses models of rational inattention, sequential signal processing, and search. We provide limits on the extent to which attention costs can be recovered from choice data. We experimentally elicit state dependent stochastic choice data of the form the tests require. In simple cases, tests confirm that subjects adjust their attention in response to incentives as the theory dictates.
JEL-codes: D80 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-exp, nep-mic and nep-upt
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Published as Andrew Caplin & Mark Dean, 2015. "Revealed Preference, Rational Inattention, and Costly Information Acquisition," American Economic Review, vol 105(7), pages 2183-2203.
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