1 option
Behavioral Implications of Rational Inattention with Shannon Entropy / Andrew Caplin, Mark Dean.
- Format:
- Book
- Author/Creator:
- Caplin, Andrew.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19318.
- NBER working paper series no. w19318
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- The model of rational inattention with Shannon mutual information costs is increasingly ubiquitous. We introduce a new solution method that lays bare the general behavioral properties of this model and liberates development of alternative models. We experimentally test a key behavioral property characterizing the elasticity of choice mistakes with respect to attentional incentives. We find that subjects are less responsive to such changes than the model implies. We introduce generalized entropy cost functions that better match this feature of the data and that retain key simplifying features of the Shannon model.
- Notes:
- Print version record
- August 2013.
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