Examining the Correspondence of Cognitive Costs and the Mutual Information Criterion in Rational Inattention Models

The rational inattention model has recently attracted much attention as a promising candidate to model bounded rationality in the research field of decision-making and game theory. The model presumes that the cost of information processing is proportional to the mutual information obtained from signals. It has been reported that the introduction of this information cost can explain various phenomena observed in the market, and applied in a wide range of fields such as finance, bargaining, auction, and policy analysis. However, the rational inattention model does not have a sufficient cognitive foundation, despite the amount of attention it has received. In this study, we will use both a behavioral and neural approach to investigate whether the amount of mutual information corresponds to cognitive costs.