Discrete actions in information-constrained tracking problems

0361100 - NHÚ 2012 CZ eng V - Research Report
Matějka, Filip - Sims, CH. A.
Discrete actions in information-constrained tracking problems.
Prague: CERGE-EI, 2011. 18 s. CERGE-EI Working Paper Series, 441. ISSN 1211-3298
R&D Projects: GA MŠMT LC542
Institutional research plan: CEZ:AV0Z70850503
Keywords : rational inattention * adjustment frictions * sticky prices
Subject RIV: AH - Economics
http://www.cerge-ei.cz/pdf/wp/Wp441.pdf

Optimal actions of an agent facing a Shannon capacity constraint on the translation of an uncertain signal into an action can easily turn out to be discretely distributed, even when the objective function and the initial distribution of uncertainty contain no discrete elements. We show this result analytically in a broad class of cases.
Permanent Link: http://hdl.handle.net/11104/0198507