Revealed preference, rational inattention, and costly information acquisition

Andrew Caplin; Mark Dean

doi:10.1257/aer.20140117

Revealed preference, rational inattention, and costly information acquisition

Andrew Caplin, Mark Dean

Research output: Contribution to journal › Article

Abstract

Apparently mistaken decisions are ubiquitous. To what extent does this reflect irrationality, as opposed to a rational trade-off between the costs of information acquisition and the expected benefits of learning? We develop a revealed preference test that characterizes all patterns of choice "mistakes" consistent with a general model of optimal costly information acquisition and identify the extent to which information costs can be recovered from choice data. (JEL D11, D81, D83).

Original language	English (US)
Pages (from-to)	2183-2203
Number of pages	21
Journal	American Economic Review
Volume	105
Issue number	7
DOIs	https://doi.org/10.1257/aer.20140117
State	Published - Jul 1 2015

ASJC Scopus subject areas

Economics and Econometrics

Access to Document

10.1257/aer.20140117

Fingerprint Dive into the research topics of 'Revealed preference, rational inattention, and costly information acquisition'. Together they form a unique fingerprint.

Cite this

Caplin, A., & Dean, M. (2015). Revealed preference, rational inattention, and costly information acquisition. American Economic Review, 105(7), 2183-2203. https://doi.org/10.1257/aer.20140117

@article{8814f9a6e6424b1daecfd5c1cdcee495,

title = "Revealed preference, rational inattention, and costly information acquisition",

abstract = "Apparently mistaken decisions are ubiquitous. To what extent does this reflect irrationality, as opposed to a rational trade-off between the costs of information acquisition and the expected benefits of learning? We develop a revealed preference test that characterizes all patterns of choice {"}mistakes{"} consistent with a general model of optimal costly information acquisition and identify the extent to which information costs can be recovered from choice data. (JEL D11, D81, D83).",

author = "Andrew Caplin and Mark Dean",

year = "2015",

month = jul,

day = "1",

doi = "10.1257/aer.20140117",

language = "English (US)",

volume = "105",

pages = "2183--2203",

journal = "American Economic Review",

issn = "0002-8282",

publisher = "American Economic Association",

number = "7",

}

TY - JOUR

T1 - Revealed preference, rational inattention, and costly information acquisition

AU - Caplin, Andrew

AU - Dean, Mark

PY - 2015/7/1

Y1 - 2015/7/1

N2 - Apparently mistaken decisions are ubiquitous. To what extent does this reflect irrationality, as opposed to a rational trade-off between the costs of information acquisition and the expected benefits of learning? We develop a revealed preference test that characterizes all patterns of choice "mistakes" consistent with a general model of optimal costly information acquisition and identify the extent to which information costs can be recovered from choice data. (JEL D11, D81, D83).

AB - Apparently mistaken decisions are ubiquitous. To what extent does this reflect irrationality, as opposed to a rational trade-off between the costs of information acquisition and the expected benefits of learning? We develop a revealed preference test that characterizes all patterns of choice "mistakes" consistent with a general model of optimal costly information acquisition and identify the extent to which information costs can be recovered from choice data. (JEL D11, D81, D83).

UR - http://www.scopus.com/inward/record.url?scp=84937604933&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84937604933&partnerID=8YFLogxK

U2 - 10.1257/aer.20140117

DO - 10.1257/aer.20140117

M3 - Article

AN - SCOPUS:84937604933

VL - 105

SP - 2183

EP - 2203

JO - American Economic Review

JF - American Economic Review

SN - 0002-8282

IS - 7

ER -