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Rational inattention with multiple attributes

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  • Walker-Jones, David

Abstract

This paper studies a new measure for the cost of learning that allows the different attributes of the options faced by an agent to differ in their associated learning costs. The new measure maintains the tractability of Shannon's classic measure but produces richer choice predictions and identifies a new form of informational bias significant for welfare and counterfactual analysis that is conducted with the multinomial logit model. Necessary and sufficient conditions are provided for optimal agent behavior under the new measure for the cost of learning.

Suggested Citation

  • Walker-Jones, David, 2023. "Rational inattention with multiple attributes," Journal of Economic Theory, Elsevier, vol. 212(C).
    • Handle: RePEc:eee:jetheo:v:212:y:2023:i:c:s0022053123000844
    DOI: 10.1016/j.jet.2023.105688
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    References listed on IDEAS

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    More about this item

    Keywords

    Rational inattention; Perceptual distance; Costly learning; Shannon Entropy;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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