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Rational inattentiveness in a forecasting experiment

Listed author(s):
  • Goecke, Henry
  • Luhan, Wolfgang J.
  • Roos, Michael W.M.

While standard theory assumes rational, optimizing agents under full information, the latter is rarely found in reality. Information has to be acquired and processed—both involving costs. In rational-inattentiveness models agents update their information set only when the benefit outweighs the information cost. We test the rational-inattentiveness model in a controlled laboratory environment. Our design is a forecasting task with costly information and a clear cost–benefit structure. While we find numerous deviations from the model predictions on the individual level, the aggregate results are consistent with rational-inattentiveness and sticky information models rejecting simpler behavioral heuristics.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268113002138
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 94 (2013)
Issue (Month): C ()
Pages: 80-89

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Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:80-89
DOI: 10.1016/j.jebo.2013.08.013
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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