The Two-Period Rational Inattention Model: Accelerations and Analyses
AbstractThis paper demonstrates the properties of and a solution method for the more general two-period Rational Inattention model of Sims (2006). It is shown that the corresponding optimization problem is convex and can be solved very quickly. This paper also demonstrates a computational tool well-suited to solving Rational Inattention models and further illustrates a critique raised in Sims (2006) regarding Rational Inattention models whose solutions assume parametric formulations rather than solve for their optimally-derived, non-parametric counterparts.
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Bibliographic InfoArticle provided by Society for Computational Economics in its journal Computational Economics.
Volume (Year): 33 (2009)
Issue (Month): 1 (February)
Rational inattention; Information-processing constraints; Numerical optimization;
Other versions of this item:
- Kurt F. Lewis, 2008. "The two-period rational inattention model: accelerations and analyses," Finance and Economics Discussion Series 2008-22, Board of Governors of the Federal Reserve System (U.S.).
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- B. D. McCullough & H. D. Vinod, 2003. "Verifying the Solution from a Nonlinear Solver: A Case Study," American Economic Review, American Economic Association, vol. 93(3), pages 873-892, June.
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- N. Gregory Mankiw & Ricardo Reis, 2010. "Imperfect Information and Aggregate Supply," Discussion Papers 0910-11, Columbia University, Department of Economics.
- Tutino, Antonella, 2008. "The rigidity of choice: lifetime savings under information-processing constraints," MPRA Paper 16744, University Library of Munich, Germany, revised 24 Jul 2009.
- Leonardo Melosi, 2009.
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- Leonardo Melosi, 2009. "A Likelihood Analysis of Models with Information Frictions," PIER Working Paper Archive 09-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Antonella Tutino, 2008. "The rigidity of choice: Lifecycle savings with information-processing limits," Finance and Economics Discussion Series 2008-62, Board of Governors of the Federal Reserve System (U.S.).
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