We present a novel approach to finite Rational Inattention (RI) models based on the ignorance equivalent, a fictitious action with state-dependent payoffs that effectively summarizes the optimal learning and conditional choices. The ignorance equivalent allows us to recast the RI problem as a...

In an experiment on markets for services, we find that consumers are likely to stick to defaults and achieve suboptimal outcomes. We unpack two key psychological reasons why they do this - complexity (in terms of non-linearity, number and bundling of tariffs) and consumer inattention. The...

We examine the robustness of information cascades in laboratory experiments. Apart from the situation in which each player can obtain a signal for free (as in the experiment by Anderson and Holt, 1997, QTR {American Economic Review}), the case of costly signals is studied where players decide...

We study the determinants of ignoring costless information on measures to address Covid-19. In the experiment, participants could choose between two options that differed in their contribution to the Corona Fund of the Red Cross USA and in their own payoffs. Depending on the treatment, either...

We propose a new principle for measuring the cost of information structures in rational inattention problems, based on the cost of generating the information used to make a decision through a dynamic evidence accumulation process. We introduce a continuous-time model of sequential information...

We explore model misspecification in an observational learning framework. Individuals learn from private and public signals and the actions of others. An agent's type specifies her model of the world. Misspecified types have incorrect beliefs about the signal distribution, how other agents draw...

Beliefs are a central determinant of behavior. Recent models assume that beliefs about or the anticipation of future consumption have direct utility consequences. This gives rise to informational preferences, i.e., preferences over the timing and structure of information. Using a novel and...