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Attention elasticities and invariant information costs

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  • D'aniel Csaba

Abstract

We consider a generalization of rational inattention problems by measuring costs of information through the information radius (Sibson, 1969; Verd\'u, 2015) of statistical experiments. We introduce a notion of attention elasticity measuring the sensitivity of attention strategies with respect to changes in incentives. We show how the introduced class of cost functions controls attention elasticities while the Shannon model restricts attention elasticity to be unity. We explore further differences and similarities relative to the Shannon model in relation to invariance, posterior separability, consideration sets, and the ability to learn events with certainty. Lastly, we provide an efficient alternating minimization method -- analogous to the Blahut-Arimoto algorithm -- to obtain optimal attention strategies.

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  • D'aniel Csaba, 2021. "Attention elasticities and invariant information costs," Papers 2105.07565, arXiv.org.
    • Handle: RePEc:arx:papers:2105.07565
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    References listed on IDEAS

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    1. Luciano Pomatto & Philipp Strack & Omer Tamuz, 2018. "The Cost of Information: The Case of Constant Marginal Costs," Papers 1812.04211, arXiv.org, revised Feb 2023.
    2. Filip Matêjka & Alisdair McKay, 2015. "Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model," American Economic Review, American Economic Association, vol. 105(1), pages 272-298, January.
    3. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
    4. Benjamin Hébert & Michael Woodford, 2021. "Neighborhood-Based Information Costs," American Economic Review, American Economic Association, vol. 111(10), pages 3225-3255, October.
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