Revealed Preference, Rational Inattention, and Costly Information Acquisition

62 Pages Posted: 1 Feb 2014 Last revised: 24 Apr 2021

See all articles by Andrew Caplin

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Mark Dean

Brown University - Department of Economics; New York University (NYU) - Department of Economics

Date Written: January 2014

Abstract

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.

Suggested Citation

Caplin, Andrew and Dean, Mark R. W., Revealed Preference, Rational Inattention, and Costly Information Acquisition (January 2014). NBER Working Paper No. w19876, Available at SSRN: https://ssrn.com/abstract=2389204

Andrew Caplin (Contact Author)

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Mark R. W. Dean

Brown University - Department of Economics ( email )

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New York University (NYU) - Department of Economics ( email )

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