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Costly subjective learning

Author

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  • Higashi, Youichiro
  • Hyogo, Kazuya
  • Takeoka, Norio

Abstract

We examine the behavioral foundation of rational inattention within a menu-choice framework. Unlike previous studies, our approach enables the unique identification of nonadditive information costs. The nonadditivity of information costs makes the effective cost inherently dependent on benefits of information. In contrast to additive cost models, this feature may lead to a violation of the preference for early resolution of menu uncertainty. Early resolution is typically preferable as it allows the agent to fine-tune information for relevant menus. However, if the effective cost function is convex in benefits of information, late resolution may reduce the effective information costs. The violation occurs when this cost-reduction effect outweighs the benefits of early resolution.

Suggested Citation

  • Higashi, Youichiro & Hyogo, Kazuya & Takeoka, Norio, 2025. "Costly subjective learning," Journal of Economic Theory, Elsevier, vol. 226(C).
    • Handle: RePEc:eee:jetheo:v:226:y:2025:i:c:s0022053125000432
    DOI: 10.1016/j.jet.2025.105997
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    More about this item

    Keywords

    Information acquisition; Rational inattention; Preference for the timing of the resolution of uncertainty; Preference over menus;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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