Rational Inattention, Competitive Supply, and Psychometrics

67 Pages Posted: 5 Nov 2018 Last revised: 4 Jun 2021

See all articles by Andrew Caplin

Andrew Caplin

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

Dániel Csaba

New York University (NYU)

John Leahy

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy

Oded Nov

NYU Tandon School of Engineering

Date Written: November 2018

Abstract

We introduce a simple method of recovering attention costs from choice data. Our method rests on a precise analogy with production theory. Costs of attention determine consumer demand and consumer welfare just as a competitive firm's technology determines its supply curve and profits. We implement our recovery method experimentally, outline applications, and link our work to the broader literature on inattention and mistaken decisions.

Suggested Citation

Caplin, Andrew and Csaba, Dániel and Leahy, John and Nov, Oded, Rational Inattention, Competitive Supply, and Psychometrics (November 2018). NBER Working Paper No. w25224, Available at SSRN: https://ssrn.com/abstract=3278524

Andrew Caplin (Contact Author)

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

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National Bureau of Economic Research (NBER)

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Dániel Csaba

New York University (NYU) ( email )

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John Leahy

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

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United States

Oded Nov

NYU Tandon School of Engineering ( email )

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New York, NY 11201
United States

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