Most theories in economics and finance predict what people will do, given what they know about the world around them. But what do people know about their environments? The study of information choice seeks to answer this question, explaining why economic players know what they know--and how the information they have affects collective outcomes. Instead of assuming what people do or don't know, information choice asks what people would choose to know. Then it predicts what, given that information, they would choose to do. In this textbook, Laura Veldkamp introduces graduate students in economics and finance to this important new research.
The book illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas. It shows how to build and test applied theory models with information frictions. And it covers recent work on topics such as rational inattention, information markets, and strategic games with heterogeneous information.
- Illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas
- Teaches how to build and test applied theory models with information frictions
- Covers recent research on topics such as rational inattention, information markets, and strategic games with heterogeneous information
"The book is well structured and well written. . . . Veldkamp does an excellent job combining different streams of the literature of information choice. This book helped me a lot to give a structure to my partial knowledge on imperfect information."--Christian Merkl, Journal of Economics
"This book synthesizes and extends recent research on the role that imperfect and dispersed information plays in macroeconomics and finance. By way of many examples and applications, Laura Veldkamp forcefully argues that research in this area should more strongly emphasize how information is produced and exchanged, and how agents choose their information. The book discusses new modeling approaches and new applications, draws many connections between different topics, and covers new techniques. While covering this new theoretical ground, Veldkamp insists on explaining stylized facts, addressing empirical puzzles, and generating testable predictions."--Pierre-Olivier Weill, University of California, Los Angeles
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