hero working papers

Rational Inattention and Rate Distortion Theory: A Teaching Note

Number: 630
Year: 2018
Author(s): Tommaso Denti, Massimo Marinacci, Luigi Montrucchio
In this teaching note we discuss the relation between rational inattention and a major branch of information theory called rate distortion theory. Focusing on methods, we translate tools from rate distortion theory into the language of rational inattention. These tools provide an alternative, more primitive, approach to the study of optimal attention allocation.