We present a theory of discrete choice with information costs that supports deliberate stochastic choice. We use a unique experimental dataset to distinguish between errors arising from limitations on a decision maker's cognitive abilities and conscious disregard of information. Experimental...

This paper argues that the solution to a dynamic optimization problem of consumption and labor under finite information-processing capacity can simultaneously explain the intertemporal and intratemporal labor wedges. It presents a partial equilibrium model where a representative risk adverse...

This paper analyzes how information-processing limitations affect consumption in a dynamic full-fledged non-linnear quadratic Gaussian (LQG) setting. In the model, risk-averse consumers rationally choose the quantity and quality of information to process about their wealth, while constrained by...