Year: 2013
Type: report
Abstract: The model of rational inattention with Shannon mutual information costs is increasingly ubiquitous.We introduce a new solution method that lays bare the general behavioral properties of this model and liberates development of alternative models.We experimentally test a key behavioral property characterizing the elasticity of choice mistakes with respect to attentional incentives.We find that subjects are less responsive to such changes than the model implies.We introduce generalized entropy cost functions that better match this feature of the data and that retain key simplifying features of the Shannon model.
DOI: 10.3386/w19318
Authors: Andrew Caplin, Mark Dean
Institutions: National Bureau of Economic Research, New York University
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1533071129