In this paper, we introduce a new measure of how close a set of choices are to satisfying the observable implications of rational choice, and apply it to a large balanced panel of household level consumption data. We use this method to answer three related questions: (i) 'How close are...

We provide a full behavioral characterization of the standard Shannon model of rational inattention. The key axiom is "Invariance under Compression", which identifies this model as capturing an ideal form of attention-constrained choice. We introduce tractable generalizations that allow for many...

Willingness to pay (WTP) and willingness to accept (WTA) a monetary amount for a lottery should be closely related. In data from an incentivized survey of a representative sample of 3,000 U.S. adults, we find that WTA and WTP for a lottery are, at best, weakly correlated. Across all respondents,...

We develop a revealed preference test for optimal acquisition of costly information. The test encompasses models of rational inattention, sequential signal processing, and search. We provide limits on the extent to which attention costs can be recovered from choice data. We experimentally elicit...

Incentivized experiments are commonly used to estimate marginal rate of intertemporal substitution (MRS) in the lab and in the field, and to make inferences about subject’s time preference. This paper considers the implications of an integrated model of behavior in which individuals are...