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Rational inattentiveness in a forecasting experiment

Research output: Contribution to journalArticlepeer-review

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

Documents

  • LUHAN_2013_cright_JEBO_Rational inattentiveness in a forecasting experiment

    Rights statement: NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Behavior and Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior and Organization, 94, (2013), DOI: 10.1016/j.jebo.2013.08.013

    Accepted author manuscript (Post-print), 832 KB, PDF document

    Licence: CC BY-NC-ND

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