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 › peer-review

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

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