Rationally Inattentive Behavior: Characterizing and Generalizing Shannon Entropy

We provide a full behavioral characterization of the standard Shannon model rational inattention. The key axiom is Invariance under Compression, which identifies this as capturing an ideal form attention-constrained choice. introduce tractable generalizations that allow for many known violations from ideal, including asymmetries and complementarities in learning, context effects, low responsiveness to incentives. even more general method recovering attention costs data. data set we characterize all patterns state dependent stochastic choice