Posterior separable cost of information
By: Denti, Tommaso
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Material type: 
BookPublisher: The American Economic Review Description: 112(10), Oct, 2022: p.3215-3259.
In:
The American Economic ReviewSummary: We provide testable conditions under which the cost of acquiring information is given by the expected reduction of a measure of uncertainty (e.g., entropy). The assumption, under the name of posterior separability, is nearly universal in the literature of rational inattention; yet, a testable characterization has been lacking. In applications to experimental data, we indicate situations in which posterior separability is—and is not—a compelling assumption for the cost of information; we propose a generalization to address some of its shortcomings. We also show how to identify and estimate nonparametrically the cost of information from observable choice behavior. – 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(10), Oct, 2022: p.3215-3259 | Available | AR128141 |
We provide testable conditions under which the cost of acquiring information is given by the expected reduction of a measure of uncertainty (e.g., entropy). The assumption, under the name of posterior separability, is nearly universal in the literature of rational inattention; yet, a testable characterization has been lacking. In applications to experimental data, we indicate situations in which posterior separability is—and is not—a compelling assumption for the cost of information; we propose a generalization to address some of its shortcomings. We also show how to identify and estimate nonparametrically the cost of information from observable choice behavior. – Reproduced
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