Rational inattentiveness in a forecasting experiment

Henry Goecke, Wolfgang J. Luhan, Michael W.m. Roos

    Research output: Contribution to journalArticlepeer-review

    216 Downloads (Pure)

    Abstract

    While standard theory assumes rational, optimizing agents under full information, the latter is rarely found in reality. Information has to be acquired and processed—both involving costs. In rational-inattentiveness models agents update their information set only when the benefit outweighs the information cost. We test the rational-inattentiveness model in a controlled laboratory environment. Our design is a forecasting task with costly information and a clear cost–benefit structure. While we find numerous deviations from the model predictions on the individual level, the aggregate results are consistent with rational-inattentiveness and sticky information models rejecting simpler behavioral heuristics.
    Original languageEnglish
    Pages (from-to)80-89
    JournalJournal of Economic Behavior & Organization
    Volume94
    Early online date3 Sep 2013
    DOIs
    Publication statusPublished - 1 Oct 2013

    Keywords

    • Experiment
    • Information
    • Rational inattentiveness
    • Forecasting

    Fingerprint

    Dive into the research topics of 'Rational inattentiveness in a forecasting experiment'. Together they form a unique fingerprint.

    Cite this