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Computational Economics

, Volume 33, Issue 1, pp 79–97 | Cite as

The Two-Period Rational Inattention Model: Accelerations and Analyses

  • Kurt F. LewisEmail author
Article

Abstract

This paper demonstrates the properties of, and a solution method for, the more general two-period Rational Inattention model of Sims (Rational inattention: A research agenda, 2006). It is shown that the corresponding optimization problem is convex and can be solved very quickly. This paper also demonstrates a computational tool well-suited to solving Rational Inattention models and further illustrates a critique raised in Sims (Rational inattention: A research agenda, 2006) regarding Rational Inattention models whose solutions assume parametric formulations rather than solve for their optimally-derived, non-parametric counterparts.

Keywords

Rational inattention Information-processing constraints Numerical optimization 

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References

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Copyright information

© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  1. 1.Monetary Affairs, Board of Governors of the Federal Reserve SystemWashingtonUSA

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