Optimal Attention Management: A Tractable Framework

34 Pages Posted: 1 Jul 2020

See all articles by Elliot Lipnowski

Elliot Lipnowski

Columbia University

Laurent Mathevet

New York University (NYU) - Department of Economics

Dong Wei

University of California, Berkeley - Department of Economics

Date Written: June 8, 2020

Abstract

A well-intentioned principal provides information to a rationally inattentive agent without internalizing the agent’s cost of processing information. Whatever information the principal makes available, the agent may choose to ignore some. We study optimal information provision in a tractable model with quadratic payoffs where full disclosure is not optimal. We characterize incentive-compatible information policies, that is, those to which the agent willingly pays full attention. In a leading example with three states, optimal disclosure involves information distortion at intermediate costs of attention. As the cost increases, optimal information abruptly changes from downplaying the state to exaggerating the state.

Keywords: information disclosure, rational inattention, costly information processing, paternalistic information design

JEL Classification: D82, D83, D91

Suggested Citation

Lipnowski, Elliot and Mathevet, Laurent and Wei, Dong, Optimal Attention Management: A Tractable Framework (June 8, 2020). Available at SSRN: https://ssrn.com/abstract=3622521 or http://dx.doi.org/10.2139/ssrn.3622521

Elliot Lipnowski

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Laurent Mathevet

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Dong Wei (Contact Author)

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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