This paper presents a laboratory experiment that directly tests the theoretical predictions of consumption choices under rational inattention. Subjects are asked to select consumption when income is random. They can optimally decide to reduce uncertainty about income by acquiring signals about...

We present a model where rationally inattentive agents decide how much to save while imperfectly tracking interest rate changes. Suitable assumptions on agents’ preferences and interest rate distribution allow us to derive testable theoretical predictions and their implications for monetary...