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, decision makers can be biased, display aversion to prior uncertainty, and thus tend to select choices that are familiar (i … risk-averse investors who select risky projects in an environment characterized by epistemic uncertainty (risk …
Persistent link: https://www.econbiz.de/10014358846
, decision makers can be biased, display aversion to prior uncertainty, and thus tend to select choices that are familiar (i … risk-averse investors who select risky projects in an environment characterized by epistemic uncertainty (risk …
Persistent link: https://www.econbiz.de/10014348996
This paper establishes a general equivalence between discrete choice and rational inattention models. Matejka and McKay (2015) showed that when information costs are modelled using the Shannon entropy, the choice probabilities in the rational inattention (RI) model take the multinomial logit...
Persistent link: https://www.econbiz.de/10012854838
We present a novel approach to finite Rational Inattention (RI) models based on the ignorance equivalent, a fictitious action with state-dependent payoffs that effectively summarizes the optimal learning and conditional choices. The ignorance equivalent allows us to recast the RI problem as a...
Persistent link: https://www.econbiz.de/10012843760
Acquiring information about destinations can be costly for migrants. We model information frictions in the rational inattention framework and obtain a closed-form expression for a migration gravity equation that we bring to the data. The model predicts that ows from countries with a higher cost...
Persistent link: https://www.econbiz.de/10012194685
This paper presents a general framework for constructing and solving the multivariate static linear quadratic Gaussian (LQG) rational inattention tracking problem. We interpret the nature of the solution and the implied action of the agent, and we construct representations that formalize how the...
Persistent link: https://www.econbiz.de/10011803264
This paper studies static rational inattention problems with multiple actions and multiple shocks. We solve for the optimal signals chosen by agents and provide tools to interpret information processing. By relaxing restrictive assumptions previously used to gain tractability, we allow agents...
Persistent link: https://www.econbiz.de/10012806924
We present a geometric approach to the finite Rational Inattention (RI) model, recasting it as a convex optimization problem with reduced dimensionality that is well suited to numerical methods. We provide an algorithm that outperforms existing RI computation techniques in terms of both speed...
Persistent link: https://www.econbiz.de/10014496939
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...
Persistent link: https://www.econbiz.de/10011705099
with the multinomial logit model. This provides a new interpretation for a workhorse model of discrete choice theory. We …
Persistent link: https://www.econbiz.de/10013122426