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Rational Inattention and Rate Distortion Theory: A Teaching Note

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  • Tommaso Denti
  • Massimo Marinacci
  • Luigi Montrucchio

Abstract

In this teaching note we discuss the relation between rational inattention and a major branch of information theory called ?rate distortion theory.? Focusing on methods, we translate tools from rate distortion theory into the language of rational inattention. These tools provide an alternative, more primitive, approach to the study of optimal attention allocation.

Suggested Citation

  • Tommaso Denti & Massimo Marinacci & Luigi Montrucchio, 2018. "Rational Inattention and Rate Distortion Theory: A Teaching Note," Working Papers 630, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:630
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    References listed on IDEAS

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    1. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2018. "A characterization of probabilities with full support in metric spaces, and Laplaces method," Working Papers 620, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    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. Matějka, Filip & Mackowiak, Bartosz & Wiederholt, Mirko, 2018. "Survey: Rational Inattention, a Disciplined Behavioral Model," CEPR Discussion Papers 13243, C.E.P.R. Discussion Papers.
    4. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
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