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Inattention to States and Characteristics

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  • Chris Engh

Abstract

We study a generalization of the state-action rational inattention model with two dimensions of uncertainty: states and hedonic characteristics. The resulting conditional choice probability takes a familiar weighted multinomial logit form, but in contrast to the state-action model, is unique and is not a corner solution. The model imposes testable restrictions on the behavior of choice probabilities in markets with product entry.

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  • Chris Engh, 2025. "Inattention to States and Characteristics," Papers 2508.05939, arXiv.org.
    • Handle: RePEc:arx:papers:2508.05939
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    References listed on IDEAS

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    1. Filip Matêjka & Alisdair McKay, 2015. "Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model," American Economic Review, American Economic Association, vol. 105(1), pages 272-298, January.
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