Rationally inattentive preferences and hidden information costs
MetadataShow full item record
We show how information acquisition costs can be identified using observable choice data. Identifying information costs from behavior is especially relevant when these costs depend on factors–such as time, effort and cognitive resources–that are difficult to observe directly, as in models of rational inattention. Using willingness-to-pay data for opportunity sets–which require more or less information to make choices–we establish a set of canonical properties that are necessary and sufficient to identify information costs. We also provide an axiomatic characterization of the induced rationally inattentive preferences, and show how they reveal the amount of information a decision maker acquires.
de Oliveira , H , Denti , T , Mihm , M & Ozbek , K 2017 , ' Rationally inattentive preferences and hidden information costs ' Theoretical Economics , vol. 12 , no. 2 , pp. 621-654 . https://doi.org/10.3982/TE2302
Copyright © 2017 The Authors. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.