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The Indirect Cost of Information

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  • Weijie Zhong

Abstract

We study the indirect cost of information from sequential information cost minimization. A key sub-additivity condition, together with monotonicity equivalently characterizes the class of indirect cost functions generated from any direct information cost. Adding an extra (uniform) posterior separability condition equivalently characterizes the indirect cost generated from any direct cost favoring incremental evidences. We also provide the necessary and sufficient condition when prior independent direct cost generates posterior separable indirect cost.

Suggested Citation

  • Weijie Zhong, 2018. "The Indirect Cost of Information," Papers 1809.00697, arXiv.org, revised Apr 2020.
    • Handle: RePEc:arx:papers:1809.00697
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    References listed on IDEAS

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    1. Jakub Steiner & Colin Stewart & Filip Matějka, 2017. "Rational Inattention Dynamics: Inertia and Delay in Decision‐Making," Econometrica, Econometric Society, vol. 85, pages 521-553, March.
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