Events

Economics Seminar

Authors:

• Valentin Haddad
  Princeton University

• Marianne Andries
  Toulouse School of Economics

We propose a theory of inattention solely based on preferences, absent any cognitive limitations and external costs of acquiring information. Under disappointment aversion, information decisions and risk attitude are intertwined, and agents are intrinsically information averse. We illustrate this link between attitude towards risk and information in a standard portfolio problem, in which agents balance the costs, endogenous in our framework, and benefits of information. We show agents never choose to receive information continuously in a diffusive environment: they optimally acquire information at infrequent intervals only. We highlight a novel channel through which the optimal frequency of information acquisition decreases when risk increases, consistent with empirical evidence. Our framework accommodates a broad range of applications, suggesting our approach can explain many observed features of decision under uncertainty.