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The Rationality of Information Gathering: Monopoly

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  • Begg, David K H
  • Imperato, Isabella

Abstract

This paper focuses on the optimal use of information in the presence of fixed, sunk, processing costs. The agent, being aware of the trade-off between good (informed) forecasts and their cost, may decide to process her information only at discrete intervals of time. The optimal length of these intervals, during which no new information is taken on board, depends on the cost of processing information and on the variance of the stochastic variable to be monitored. These concepts are illustrated in a simple monopoly model and are extended to the cases of model uncertainty and the distinction between public and private monopoly. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 69 (2001)
Issue (Month): 3 (June)
Pages: 237-52

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Handle: RePEc:bla:manchs:v:69:y:2001:i:3:p:237-52

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Cited by:
  1. Philippe Bacchetta & Eric van Wincoop, 2006. "Incomplete information processing: a solution to the forward discount puzzle," Working Paper Series 2006-35, Federal Reserve Bank of San Francisco.
  2. Easaw, Joshy & Ghoshray, Atanu, 2010. "News and households' subjective macroeconomic expectations," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 469-475, March.

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