Rationally Inattentive Preferences

We study preferences over menus of acts and provide axiomatic foundations for a model of rational inattention (Sims [37, 38]). The axioms are motivated by the idea that the decision maker faces an abundance of information, which requires attention to select and process. In the representation, the decision maker evaluates menus by solving an information acquisition problem, where the information costs are measured by a function monotone in the Blackwell
order. We show that all parameters of the model – the utility function on consequences, prior beliefs, and the information cost function – can be uniquely identified from preferences satisfying the axioms. The connection with the Blackwell order also allows us to characterize behavioral measures of comparative inattention.