Revealed Preference, Rational Inattention, and Costly Information Acquisition
AbstractWe develop a revealed preference test for optimal acquisition of costly information. The test encompasses models of rational inattention, sequential signal processing, and search. We provide limits on the extent to which attention costs can be recovered from choice data. We experimentally elicit state dependent stochastic choice data of the form the tests require. In simple cases, tests confirm that subjects adjust their attention in response to incentives as the theory dictates.
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Date of creation: Jan 2014
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Find related papers by JEL classification:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-08 (All new papers)
- NEP-CTA-2014-02-08 (Contract Theory & Applications)
- NEP-EXP-2014-02-08 (Experimental Economics)
- NEP-MIC-2014-02-08 (Microeconomics)
- NEP-UPT-2014-02-08 (Utility Models & Prospect Theory)
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