This paper develops a decision-theoretic framework to study rational inattention (Sims [1998, 2003]). We provide an axiomatic characterization that relates rationally inattentive behavior to attitudes towards flexibility (Kreps [1979]) and temporal resolution of uncertainty (Kreps and Porteus...

In the seminal rational inattention model of Matĕjka and McKay (2015), logit demand arises from the discrete choice of agents who are uncertain about choice payoffs and have access to a flexible, costly information acquisition technology (RI-logit). A notable limitation of this powerful...

We experimentally test overconfidence in investment decisions by offering participants the possibility to substitute their own for alternative investment choices. Overall, 149 subjects participated in two experiments, one with just one risky asset, the other with two risky assets. Overconfidence...

Risk is one of the key aspects in financial decision-making and therefore an integral part of the behavioral economics and finance literature. Focusing on the conceptualization of the term "risk", which researchers have addressed from numerous angles, this comment aims to offer a critical...