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Survey: Rational Inattention, a Disciplined Behavioral Model

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  • Mackowiak, Bartosz Adam
  • Matejka, Filip
  • Wiederholt, Mirko

Abstract

A recent growing body of studies shows that many important phenomena in economics are, or can be, driven by the fact that humans cannot digest all available information, but they can choose which exact pieces of information to attend to. Such phenomena span macroeconomics, finance, labor economics, political economy, and beyond. People's choices of what information to attend to, i.e., what optimal heuristic to use, are driven by current economic conditions and determine the form of mistakes that they make. Combining these behavioral insights together with optimizing approaches of classical economics yields a new generally applicable model. The implied behavior features numerous types of empirically supported departures from existing classical models, is potentially highly practical for answering policy questions, and motivates further empirical work. One distinction from most models in behavioral economics is that this model allows for studying the adaptation of agents' behavioral biases due to changes in policy or economic conditions.

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  • Mackowiak, Bartosz Adam & Matejka, Filip & Wiederholt, Mirko, 2018. "Survey: Rational Inattention, a Disciplined Behavioral Model," CEPR Discussion Papers 13243, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13243
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    9. Juan-Camilo Chaves, 2019. "The Less I Know The Better? A Model of Rational Attention and Experimentation," Documentos CEDE 017606, Universidad de los Andes - CEDE.
    10. Hebert, Benjamin & Woodford, Michael, 2018. "Information Costs and Sequential Information Sampling," Research Papers 3751, Stanford University, Graduate School of Business.
    11. Jianjun Miao, 2019. "Multivariate LQG Control under Rational Inattention in Continuous Time," Boston University - Department of Economics - Working Papers Series WP2019-06, Boston University - Department of Economics.
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    22. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    23. Claudio Michelacci & Luigi Paciello, 2020. "Aggregate Risk or Aggregate Uncertainty? Evidence from UK Households," EIEF Working Papers Series 2006, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2020.
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    Keywords

    Behavioral economics; endogenous information acquisition; rational inattention;
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