Rational inattention and the monotone likelihood ratio property

• 成果类型: Article
• 署名作者: Mensch, Jeffrey
• 署名单位: Hebrew University of Jerusalem
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2021.105284
• 发表日期: 2021
• 关键词: rational inattention; information acquisition; Monotone likelihood ratio property; Increasing differences

摘要

This paper explores the connection between rational inattention and the monotone likelihood ratio prop-erty (MLRP). In many economic problems, agents prefer to take a higher action when there is a higher underlying state. It is often assumed that these agents have noisy signals that are strongly correlated with the underlying state, i.e. ordered by the MLRP. Separately, a large literature has recently explored the be-havior of rationally inattentive agents. Under some common separability and smoothness assumptions on the class of attention costs, I show that agents will always acquire signals that are ordered by the MLRP within such economic problems if and only if they have attention costs proportional to entropy reduction. With any other attention costs, agents err regarding the relative benefit of actions at different states. Ex-tending to games, I provide conditions under which players first acquire MLRP-ordered signals, and then choose higher actions given higher signals. I then apply these results to independent private-value auctions. (c) 2021 Elsevier Inc. All rights reserved.