American Economic Review: Vol. 104 No. 5 (May 2014)

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Rational Attention and Adaptive Coding: A Puzzle and a Solution

Article Citation

Padoa-Schioppa, Camillo, and Aldo Rustichini. 2014. "Rational Attention and Adaptive Coding: A Puzzle and a Solution." American Economic Review, 104(5): 507-13.

DOI: 10.1257/aer.104.5.507

Abstract

Adaptive Coding is the property of the brain to adjust its response to statistical properties of the environment. Its effect is an improved discrimination among signals under the constraints on the dynamic range of its response. It can thus be considered the neural correspondent of Rational Attention, which models how a rational decisionmaker allocates attention among different informative signals. There is strong evidence of existence of widespread adaptive coding. Adaptive coding introduces a dependence of choice from the environment which is not observed in behavior. We discuss potential solutions and propose Hebbian learning as a potentially satisfactory answer.

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Authors

Padoa-Schioppa, Camillo (Washington U in St Louis)
Rustichini, Aldo (U MN)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
D82: Asymmetric and Private Information; Mechanism Design
D83: Search; Learning; Information and Knowledge; Communication; Belief
D87: Neuroeconomics


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