A unified framework for understanding asset prices and aggregate fluctuations is critical for understanding both issues. I show that a real business cycle model with external habit preferences and capital adjustment costs provides one such framework. The estimated model matches the first two...

We introduce a simple method of recovering attention costs from choice data. Our method rests on a precise analogy with production theory. Costs of attention determine consumer demand and consumer welfare just as a competitive firm's technology determines its supply curve and profits. We...

Costs of attention, while central to choice behavior, have proven hard to measure. We introduce a simple method of recovering them from choice data. Our recovery method rests on the observation that costs of attention play precisely the same role in consumer choice as do a competitive firm's...