in less stable aggregate conditions.

We apply the rational inattention approach to information frictions to a discrete choice problem. The rationally inattentive agent chooses how to process information about the unknown values of the available options to maximize the expected value of the chosen option less an information cost. We...

This paper proposes a mechanism leading to rigid pricing as an opti- mal strategy. It applies a framework of rational inattention to study the pricing strategies of a monopolistic seller facing a consumer with limited information capacity. The consumer needs to process information about prices,...

How do voters allocate costly attention to alternative political issues? And how does selective ignorance of voters interact with policy design by politicians? We address these questions by developing a model of electoral competition with rationally inattentive voters. Rational inattention...

We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they...

Individuals must often choose among discrete alternatives with imperfect informa- tion about their values. Before choosing, they may have an opportunity to study the options, but doing so is costly. This costly information acquisition creates new choices such as the number of and types of...

We study a market with rationally inattentive consumers who are unsure of the terms of the offers made by firms, but can acquire information about the terms at a cost. In a symmetric equilibrium, the price set by firms is continuously increasing in the cost of information for consumers and...

We link two important ideas: attention is scarce and lack of information about an individual drives discrimination in selection decisions. Our model of allocation of costly attention implies that applicants from negatively stereotyped groups face "attention discrimination": less attention in...

We link two important ideas: attention is scarce and a lack of information about an individual drives discrimination in selection decisions. We model how knowledge of ethnicity influences allocation of attention to available information about an applicant. When only a small share of applicants...

Real effects of monetary policy depend crucially on the nature of nominal rigidities. These rigidities are typically modelled as sticky prices with explicit assumptions on either frequency of price adjustments (Calvo-style models) or on the cost of adjustment (menu cost models). However, recent...