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Replication data for: Inattentive Producers

Harvard Dataverse (Africa Rice Center, Bioversity International, CCAFS, CIAT, IFPRI, IRRI and WorldFish)

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Title Replication data for: Inattentive Producers
 
Identifier https://doi.org/10.7910/DVN/5W53YT
 
Creator Ricardo Reis
 
Publisher Harvard Dataverse
 
Description I present and solve the problem of a producer who faces costs of acquiring, absorbing, and processing information. I establish a series of theoretical results describing the producer's behavior. First, I find the conditions under which she prefers to set a plan for the price she charges, or instead prefers to set a plan for the quantity she sells. Second, I show that the agent rationally chooses to be inattentive to news, only sporadically updating her information. I solve for the optimal length of inattentiveness and characterize its determinants. Third, I explicitly aggregate the behavior of many such producers. I apply these results to a model of inflation. I find that the model can fit the quantitative facts on post-war inflation remarkably well, that it is a good forecaster of future inflation, and that it survives the Lucas critique by fitting also the prewar facts on inflation moderately well.
 
Date 2006