Rational Inattention, Competitive Supply, and Psychometrics
67 Pages Posted: 5 Nov 2018 Last revised: 4 Jun 2021
Date Written: November 2018
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.
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