Title: Selective Attention and Costly Learning
Speaker: Srijita Ghosh, NYU
Time: 11:30 AM, Monday, 12 December 2016.
Venue: Teaching Lab, Ground Floor, IEOR Building
Abstract: Psychologists for decades have been interested in a behavioral phenomenon known as *selective attention*, where in a experimental setup or real decision problems, agents do not pay attention to all features of the decision problem. Recently development economists have documented similar behavior for agents in a context of developing economy. In a field experiment with Indonesian seaweed farmers Hanna, Mullainathan and Schwartzstein(2014) reported that even after using the same production technology for almost a generation, farmers don't know anything about one particular dimension, namely optimal pod size, which costs them approximately 7% of their current income. This paper uses a cost of attention function to justify this selective attention as a behavior of a constrained rational agent. We build a dynamic learning model where in each period agents can choose to learn or exploit the current information to maximize expected discounted payoff. We want to show *selective attention* as a solution of a Markov decision problem under some conditions on the parameters.