Multivariate Rational Inattention
Jianjun Miao, Jieran Wu, Eric R. Young
Econometrica · 2022 · Volume 90 · Issue 2
Abstract
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.
Keywords
Rational inattention, endogenous information choice, tracking problem, optimal control, entropy, semidefinite program
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