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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

Suggested Citation

  • Begg, David K H & Imperato, Isabella, 2001. "The Rationality of Information Gathering: Monopoly," Manchester School, University of Manchester, vol. 69(3), pages 237-252, June.
  • 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," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    2. Easaw, Joshy & Ghoshray, Atanu, 2010. "News and households' subjective macroeconomic expectations," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 469-475, March.
    3. Joshy Easaw & Atanu Ghoshray & Saeed Heravi, 2014. "Households' Forming Subjective Expectations Using Perceived News: Do Shocks to ‘Good’ News Matter More Than ‘Bad’ News?," Manchester School, University of Manchester, vol. 82(1), pages 1-16, January.

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