29 Pages Posted: 30 Apr 2018 Last revised: 20 Apr 2019
Date Written: April 15, 2019
Attention costs can cause some information to be ignored and decisions to be imperfect. Can we improve the material welfare of a rationally inattentive agent by restricting his information in the first place? In our model, a well-intentioned principal provides information to an agent for whom information is costly to process, but the principal does not internalize this cost. We show that full information is universally optimal if and only if the environment comprises one issue. With multiple issues, attention management becomes optimal: the principal restricts some information to induce the agent to pay attention to other aspects.
Keywords: information disclosure, rational inattention, costly information processing, paternalistic information design
JEL Classification: D82, D83, D91
Suggested Citation: Suggested Citation