Experimental cost of information
By: Denti, T., Marinacci, M. and Rustichini, A
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Material type: 
BookPublisher: The American Economic Review Description: 112(9), Sep, 2022: p.3106-3123.
In:
The American Economic ReviewSummary: We relate two main representations of the cost of acquiring information: a cost that depends on the experiment performed, as in statistical decision theory, and a cost that depends on the distribution of posterior beliefs, as in applications of rational inattention. We show that in many cases of interest, posterior-based costs are inconsistent with a primitive model of costly experimentation. The inconsistency is at the core of known limits to the application of rational inattention in games and, more broadly, in equilibrium analyses where beliefs are endogenous; we show that an experiment-based approach helps to understand and overcome these difficulties. – Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 112(9), Sep, 2022: p.3106-3123 | Available | AR127571 |
We relate two main representations of the cost of acquiring information: a cost that depends on the experiment performed, as in statistical decision theory, and a cost that depends on the distribution of posterior beliefs, as in applications of rational inattention. We show that in many cases of interest, posterior-based costs are inconsistent with a primitive model of costly experimentation. The inconsistency is at the core of known limits to the application of rational inattention in games and, more broadly, in equilibrium analyses where beliefs are endogenous; we show that an experiment-based approach helps to understand and overcome these difficulties. – Reproduced
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