Decision Making with Rational Inattention

Maximilian Mihm, Kemal Ozbek

    Research output: Working paper


    Attention scarcity is a limitation on the ability to incorporate information into actions with state-contingent consequences. In a menu choice setting, we study an axiomatic model of decision making with scarce attention. A decision maker satisfying our axioms acts as if she chooses a joint distribution over a product space of states and signals. The decision maker uses information from the joint distribution to make better ex-post choices from menus, and attention scarcity is reflected in a subjective cost of information. Our focus on ex-ante preferences allows us to identify anticipated attention scarcity from choice behavior, and thereby clarify the decision theoretic foundations of rational inattention models proposed in Sims (1998, 2003).
    Original languageEnglish
    Number of pages49
    Publication statusUnpublished - 2012


    • information measure
    • menu choice
    • Mutual information
    • rational inattention


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