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Experimental Cost of Information

Author

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  • Tommaso Denti
  • Massimo Marinacci
  • Aldo Rustichini

Abstract

We relate two representations of the cost of acquiring information: a cost that depends on the experiment performed, as in statistical decision theory, and a cost that depends on the distribution of posterior beliefs, as in the theory of rational inattention. In many cases of interests, the two representations prove to be inconsistent with each other. We provide a systematic analysis of the inconsistency, propose a way around it, and apply our findings to information acquisition in games.

Suggested Citation

  • Tommaso Denti & Massimo Marinacci & Aldo Rustichini, 2019. "Experimental Cost of Information," Working Papers 657, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:657
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    References listed on IDEAS

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    1. Luciano Pomatto & Philipp Strack & Omer Tamuz, 2018. "The Cost of Information: The Case of Constant Marginal Costs," Papers 1812.04211, arXiv.org, revised Feb 2023.
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    12. Dillenberger, David & Krishna, R. Vijay & Sadowski, Philipp, 2023. "Subjective information choice processes," Theoretical Economics, Econometric Society, vol. 18(2), May.
    13. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
    14. de Oliveira, Henrique & Denti, Tommaso & Mihm, Maximilian & Ozbek, Kemal, 2017. "Rationally inattentive preferences and hidden information costs," Theoretical Economics, Econometric Society, vol. 12(2), May.
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    17. Doron Ravid & Anne-Katrin Roesler & Balázs Szentes, 2022. "Learning before Trading: On the Inefficiency of Ignoring Free Information," Journal of Political Economy, University of Chicago Press, vol. 130(2), pages 346-387.
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    Cited by:

    1. Matveenko, Andrei & Starkov, Egor, 2023. "Sparking curiosity or tipping the scales? Targeted advertising with consumer learning," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 172-192.
    2. Tommaso Denti & Doron Ravid, 2023. "Robust Predictions in Games with Rational Inattention," Papers 2306.09964, arXiv.org.
    3. Mark Whitmeyer, 2024. "Can One Hear the Shape of a Decision Problem?," Papers 2403.06344, arXiv.org, revised Apr 2024.
    4. Roc Armenter & Michèle Müller-Itten & Zachary Stangebye, 2020. "Rational Inattention via Ignorance Equivalence," Working Papers 20-24, Federal Reserve Bank of Philadelphia.
    5. Spyros Galanis & Sergei Mikhalishchev, 2024. "Information Aggregation with Costly Information Acquisition," Papers 2406.07186, arXiv.org.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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