Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: Jan, 2024, Volume 15, Issue 1

Geometric Methods for Finite Rational Inattention

https://doi.org/10.3982/QE2050
p. 115-144

Roc Armenter, Michèle Müller‐Itten, Zachary R. Stangebye

We present a geometric approach to the finite Rational Inattention (RI) model, recasting it as a convex optimization problem with reduced dimensionality that is well suited to numerical methods. We provide an algorithm that outperforms existing RI computation techniques in terms of both speed and accuracy in both static and dynamic RI problems. We further introduce methods to quantify the impact of numerical inaccuracy on the model's outcomes and to produce robust predictions regarding the most frequently implemented actions.


Full Content: Print

Supplemental Material

Supplement to "Geometric Methods for Finite Rational Inattention"

Roc Armenter, Michèle Müller-Itten, and Zachary R. Stangebye

This supplemental appendix contains material not found within the manuscript.

Supplement to "Geometric Methods for Finite Rational Inattention"

Roc Armenter, Michèle Müller-Itten, and Zachary R. Stangebye

The replication package for this paper is available at https://doi.org/10.5281/zenodo.8316359. The Journal checked the data and codes included in the package for their ability to reproduce the results in the paper and approved online appendices.