This paper studies the implications of information-processing limits on the consumption and savings behavior of households through time. It presents a dynamic model in which consumers rationally choose the size and scope of the information they want to process about their fi�nancial...

This paper argues that constraining people to choose consumption and labor under fi�nite Shannon capacity produces results in line with U.S. business cycle data as well as secular movements in consumption and labor supply. The model has a simple partial equilibrium setting in which risk averse...

This paper studies the implications of information-processing limits on the consumption and savings behavior of households through time. It presents a dynamic model in which consumers rationally choose the size and scope of the information they want to process concerning their financial...

Fiscal policy is as significant as, and sometimes more important than, monetary policy in determining the price level and, therefore, the dynamics of inflation.

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...