Discrete Choice and Rational Inattention: A General Equivalence Result
35 Pages Posted: 23 Dec 2016 Last revised: 13 Jun 2021
Date Written: February 6, 2020
This paper establishes a general equivalence between discrete choice and rational inattention models. Matejka and McKay (2015) showed that when information costs are modelled using the Shannon entropy, the choice probabilities in the rational inattention (RI) model take the multinomial logit form. We show that, for one given prior over states, RI choice probabilities may take the form of any additive random utility discrete choice model (ARUM) when the information cost is a Bregman information, belonging to a class defined in this paper. The prior information of the rationally inattentive agent is summarized in a constant vector of utilities in the corresponding ARUM.
Keywords: rational inattention; discrete choice models; random utility; convex analysis; generalized entropy; Bregman Information
JEL Classification: D03; C25; D81; E03
Suggested Citation: Suggested Citation