The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Rational Inattention

  • Mirko Wiederholt
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2901

Abstract

Economists have studied for a long time how decision-makers allocate scarce resources. The recent literature on rational inattention studies how decision-makers allocate the scarce resource attention. The idea is that decision-makers have a limited amount of attention and have to decide how to allocate it. The literature on rational inattention argues that the optimal allocation of attention by decision-makers can explain important features of economic data.

Keywords

Attention Attention allocation Business cycles Consumption Dynamic stochastic general equilibrium (DSGE) Entropy Expectations Finance Fiscal policy General equilibrium Imperfect information Incomplete information Information Information choice Information flow Information friction Information processing Information theory Interest rate Learning Limited Attention Macroeconomics Monetary policy Noisy signal Nominal rigidities Portfolio choice Price setting Rational inattention Savings Sims, C. A Sticky prices Uncertainty 

JEL classifications

D8 D9 E3 E5 G1 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Mirko Wiederholt
    • 1
  1. 1.