Revealed Preference, Rational Inattention, and Costly Information Acquisition
We develop a revealed preference test for optimal acquisition of costly information. The test encompasses models of rational inattention, sequential signal processing, and search. We provide limits on the extent to which attention costs can be recovered from choice data. We experimentally elicit state dependent stochastic choice data of the form the tests require. In simple cases, tests confirm that subjects adjust their attention in response to incentives as the theory dictates.
We thank Roland Benabou, Dirk Bergemann, Laurens Cherchye, Bram De Rock, Thomas Demuynck, Federico Echenique, Andrew Ellis, Paola Manzini, Marco Mariotti, Daniel Martin, Filip Matejka, Alisdair McKay, Stephen Morris, Pietro Ortoleva, Daphna Shohamy, Laura Veldkamp and Michael Woodford for their constructive contributions. We also thank Samuel Brown, Severine Toussaert and Isabel Trevino for their exceptional research assistance. An early version was circulated under the title "Rational Inattention and State Dependent Stochastic Choice". The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Andrew Caplin & Mark Dean, 2015. "Revealed Preference, Rational Inattention, and Costly Information Acquisition," American Economic Review, vol 105(7), pages 2183-2203. citation courtesy of