A note on rational inattention and rate distortion theory
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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.
KeywordsRational inattention Information theory Rate distortion theory
JEL ClassificationD81 D83 C6
Funding was provided by H2020 European Research Council (Grant No. 670337).
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