The Two-Period Rational Inattention Model: Accelerations and Analyses
This paper demonstrates the properties of and a solution method for the more general two-period Rational Inattention model of Sims (2006). It is shown that the corresponding optimization problem is convex and can be solved very quickly. This paper also demonstrates a computational tool well-suited to solving Rational Inattention models and further illustrates a critique raised in Sims (2006) regarding Rational Inattention models whose solutions assume parametric formulations rather than solve for their optimally-derived, non-parametric counterparts.
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Volume (Year): 33 (2009)
Issue (Month): 1 (February)
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- B. D. McCullough & H. D. Vinod, 2003. "Verifying the Solution from a Nonlinear Solver: A Case Study," American Economic Review, American Economic Association, vol. 93(3), pages 873-892, June.
- Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.