Economists have studied for a long time how decision-makers allocate scarce resources. The recent literature on rational inattention studies how decision-makers allocate the scarce resource attention. The idea is that decision-makers have a limited amount of attention and have to decide how to allocate it. The literature on rational inattention argues that the optimal allocation of attention by decision-makers can explain important features of economic data.
|This chapter was published in: Steven N. Durlauf & Lawrence E. Blume (ed.) , , pages , 2010, 4th quarter update.|
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