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Attention, Coordination, and Bounded Recall

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  • Alessandro Pavan

Abstract

I consider a exible framework of strategic interactions under incomplete information in which, prior to committing their actions (consumption, production, or investment decisions), agents choose the attention to allocate to an arbitrarily large number of information sources about the primitive events that are responsible for the incompleteness of information (the exogenous fundamentals). The analysis sheds light on what type of payoff¤ interdependencies contribute to inefficiency in the allocation of attention. The results for the case of perfect recall (in which the agents remember the inuence of each source on their posterior beliefs) are compared to those for the case of bounded recall (in which posterior beliefs about the underlying fundamentals are consistent with Bayesian updating, but in which the agents are unable to keep track of the influence of individual sources on their posterior beliefs).

Suggested Citation

  • Alessandro Pavan, 2014. "Attention, Coordination, and Bounded Recall," Discussion Papers 1576, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1576
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mäkinen, Taneli & Ohl, Björn, 2015. "Information acquisition and learning from prices over the business cycle," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 585-633.
    2. George‐Marios Angeletos & Fabrice Collard & Harris Dellas, 2018. "Quantifying Confidence," Econometrica, Econometric Society, vol. 86(5), pages 1689-1726, September.
    3. Benjamin Hébert & Jennifer La’O, 2023. "Information Acquisition, Efficiency, and Nonfundamental Volatility," Journal of Political Economy, University of Chicago Press, vol. 131(10), pages 2666-2723.
    4. Gossner, Olivier & Steiner, Jakub, 2018. "On the cost of misperception: General results and behavioral applications," Journal of Economic Theory, Elsevier, vol. 177(C), pages 816-847.
    5. Bianchi, Milo & Jehiel, Philippe, 2015. "Financial reporting and market efficiency with extrapolative investors," Journal of Economic Theory, Elsevier, vol. 157(C), pages 842-878.
    6. Mira Frick & Ryota Iijima & Yuhta Ishii, 2020. "Misinterpreting Others and the Fragility of Social Learning," Econometrica, Econometric Society, vol. 88(6), pages 2281-2328, November.
    7. Pavan, Alessandro & Vives, Xavier, 2015. "Information, Coordination, and Market Frictions: An Introduction," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 407-426.
    8. Bernard Herskovic & João Ramos, 2020. "Acquiring Information through Peers," American Economic Review, American Economic Association, vol. 110(7), pages 2128-2152, July.
    9. Galperti, Simone & Trevino, Isabel, 2020. "Coordination motives and competition for attention in information markets," Journal of Economic Theory, Elsevier, vol. 188(C).
    10. Yang, Ming, 2015. "Coordination with flexible information acquisition," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 721-738.
    11. Eccles, Peter & Wegner, Nora, 2017. "Scalable games: modelling games of incomplete information," Bank of England working papers 641, Bank of England.
    12. Myatt, David P. & Wallace, Chris, 2015. "Cournot competition and the social value of information," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 466-506.

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    More about this item

    Keywords

    attention; endogenous information; strategic complementarity/substitutability; externalities; efficiency; welfare; bounded recall JEL Classification: C72; D62; D83; E50;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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