Costly information acquisition

Abstract

We provide revealed preference characterizations for choices made under various forms of costly information acquisition. We examine nonseparable, multiplicative, and constrained costly information acquisition. In particular, this allows the possibility of unknown time delay for acquiring information. The techniques we use parallel the duality properties in the standard consumer problem. * We thank Yaron Azrieli, Mark Dean, and Pietro Ortoleva for useful comments and suggestions. We also thank an anonymous referee for correcting an error in an earlier draft of the paper.

Determinants of Stock Market Correlation. Accounting for Model Uncertainty and Reverse Causality in a Large Panel Setting

“…V oice ij,t represents difference in the Voice and Accountability index, which besides freedom of expression and freedom of association, captures the availability of information to citizens. The availability of information appears to be especially important in the decision of economic agents to engage in a given market, as stressed by the literature on rational inattention (Sims, 2003(Sims, , 2006 and costly information acquisition (Chambers et al, 2020). This is also shown in the research stressing the role of information availability on the performance of financial markets (Portes et al, 2001;Portes and Rey, 2005;Choi et al, 2014).…”

Predicting Choice from Information Costs

“…Such tests must rely either on variation in the agent's menu or on direct payoff information, and cannot be based solely on the agent's behavior in a single menu. Consistent with this observation, several studies consider the problem of testing whether a dataset consisting of choices and utilities over outcomes (where the latter is either given or inferred) from multiple decision problems is consistent with costly information acquisition, and if so, whether one can use these data to make inferences about the agent's cost of information (e.g., Caplin and Dean, 2015;de Oliveira et al, 2017;Caplin et al, 2020;Chambers, Liu, and Rehbeck, 2020;Dewan and Neligh, 2020;Dillenberger, Krishna, and S 2020;Lin, 2022). By studying the opposite question, namely, how one can use cost information to predict the agent's behavior, our paper shows one cannot hope for a more parsimonious class of tests than those considered by this literature.…”