Rational Inattention Dynamics: Inertia and Delay in Decision-Making

Filip Matejka, Colin Stewart and Jakub Steiner

No 307, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We solve a general class of dynamic rational-inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions. The solution resembles the choice rule in a dynamic logit model, but it is biased towards an optimal default rule that does not depend on the realized state. We apply the general solution to the study of (i) the sunk-cost fallacy; (ii) inertia in actions leading to lagged adjustments to shocks; and (iii) the tradeoff between accuracy and delay in decision-making.

Date: 2015
New Economics Papers: this item is included in nep-dcm, nep-dge, nep-mic and nep-ore
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Rational Inattention Dynamics: Inertia and Delay in Decision‐Making (2017)
Working Paper: Rational Inattention Dynamics: Inertia and Delay in Decision-Making (2016)
Working Paper: Rational Inattention Dynamics: Inertia and Delay in Decision-Making (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:307

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