The Econometric SocietyEconometrica: Mar 2022, Volume 90, Issue 2
Multivariate Rational Inattention
https://doi.org/10.3982/ECTA18086
p.
907-945
Jianjun Miao, Jieran Wu, Eric R. Young
We study optimal control problems in the multivariate linear‐quadratic‐Gaussian framework under rational inattention. We propose a three‐step procedure to solve this problem using semidefinite programming and derive the optimal signal structure without strong prior restrictions. We analyze both the transition dynamics of the optimal posterior covariance matrix and its steady state. We characterize the optimal information structure for some special cases and develop numerical algorithms for general cases. Applying our methods to solve three multivariate economic models, we obtain some results qualitatively different from the literature.
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Supplement to "Multivariate Rational Inattention"
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Supplement to "Multivariate Rational Inattention"
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