Fully rational agents are allowed to optimize over expectations formation technologies in an environment where it is costly to collect and process information. It is shown in a general equilibrium framework that optimization over expectations by rational and forward-oriented agents can lead to...

The paper recognizes that expectations and the process of their formation are subject to standard decision making and are determined as a part of equilibrium. Accordingly, the paper presents a basic framework in which the form of expectation formation is a choice variable. At any point in time...