in less stable aggregate conditions.

We apply the rational inattention approach to information frictions to a discrete choice problem. The rationally inattentive agent chooses how to process information about the unknown values of the available options to maximize the expected value of the chosen option less an information cost. We...

This paper proposes a mechanism leading to rigid pricing as an opti- mal strategy. It applies a framework of rational inattention to study the pricing strategies of a monopolistic seller facing a consumer with limited information capacity. The consumer needs to process information about prices,...

How do voters allocate costly attention to alternative political issues? And how does selective ignorance of voters interact with policy design by politicians? We address these questions by developing a model of electoral competition with rationally inattentive voters. Rational inattention...

We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they...

We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they...