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A note on rational inattention and rate distortion theory

Author

Listed:
  • Tommaso Denti

    (Cornell University)

  • Massimo Marinacci

    (Università Bocconi)

  • Luigi Montrucchio

    (Università di Torino)

Abstract

In this teaching note, we discuss the relation between rational inattention and a major branch of information theory called “rate distortion theory.” Focusing on methods, we translate tools from rate distortion theory into the language of rational inattention. These tools provide an alternative, more primitive, approach to the study of optimal attention allocation.

Suggested Citation

  • Tommaso Denti & Massimo Marinacci & Luigi Montrucchio, 2020. "A note on rational inattention and rate distortion theory," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 43(1), pages 75-89, June.
    • Handle: RePEc:spr:decfin:v:43:y:2020:i:1:d:10.1007_s10203-019-00243-0
    DOI: 10.1007/s10203-019-00243-0
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    References listed on IDEAS

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    4. Matějka, Filip & Mackowiak, Bartosz & Wiederholt, Mirko, 2018. "Survey: Rational Inattention, a Disciplined Behavioral Model," CEPR Discussion Papers 13243, C.E.P.R. Discussion Papers.
    5. Yang, Ming, 2015. "Coordination with flexible information acquisition," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 721-738.
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    8. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2018. "A characterization of probabilities with full support in metric spaces, and Laplaces method," Working Papers 620, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    Cited by:

    1. Doron Ravid, 2020. "Ultimatum Bargaining with Rational Inattention," American Economic Review, American Economic Association, vol. 110(9), pages 2948-2963, September.
    2. Pierpaolo Angelini & Fabrizio Maturo, 2020. "Non-Parametric Probability Distributions Embedded Inside of a Linear Space Provided with a Quadratic Metric," Mathematics, MDPI, vol. 8(11), pages 1-17, October.
    3. Gianluca Cassese & Pietro Rigo & Barbara Vantaggi, 2020. "A special issue on the mathematics of subjective probability," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 43(1), pages 1-2, June.

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    More about this item

    Keywords

    Rational inattention; Information theory; Rate distortion theory;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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