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A “quantized” approach to rational inattention

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  • Saint-Paul, Gilles

Abstract

In this paper, I propose a model of rational inattention where the choice variable is a deterministic function of the exogenous variables, and still only a finite amount of information is being used. This holds provided the choice variable is discrete rather than continuous; that is, the mapping from the realization of the exogenous variables to the endogenous ones is piece-wise constant.

Suggested Citation

  • Saint-Paul, Gilles, 2017. "A “quantized” approach to rational inattention," European Economic Review, Elsevier, vol. 100(C), pages 50-71.
    • Handle: RePEc:eee:eecrev:v:100:y:2017:i:c:p:50-71
    DOI: 10.1016/j.euroecorev.2017.07.004
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    Cited by:

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    3. Ellis, Andrew, 2018. "Foundations for optimal inattention," Journal of Economic Theory, Elsevier, vol. 173(C), pages 56-94.
    4. Massenot, Baptiste, 2020. "Pain of Paying in a Business Cycle Model," SAFE Working Paper Series 194, Leibniz Institute for Financial Research SAFE, revised 2020.
    5. Luo, Yulei & Young, Eric, 2013. "Rational Inattention in Macroeconomics: A Survey," MPRA Paper 54267, University Library of Munich, Germany.

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    More about this item

    Keywords

    Rational inattention; Lumpy adjustment; Price-setting; Monetary policy; Mutual information; Entropy;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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