💡 TL;DR: We blend a behavioral bias into rational inattention — and find new welfare implications. Overprecision distorts attention, causing people to suboptimally underreact to information.

📄 Read the full paper:
papers.ssrn.com/sol3/papers....

We find
✅ Feedback reduces overprecision
✅ Higher attention cost → less updating and more error.

But here’s the twist:
❗️Overprecision amplifies the effect of attention costs

This reflects irrational inattention: suboptimal updating due to biased beliefs, not just costs.

We ran a pre-registered experiment to test the model.

🎯Task: Guess average age of people in historical pictures (e.g., Solvay Conference) — before & after seeing info.

Treatments:
- Feedback on belief calibration (overprecision shifter)
- Noise on the info (attention costs shifter)

We extend rational inattention theory to incorporate overprecision.

A new prediction: Reducing costs of info processing has asymmetric welfare effects.

Example: A central bank simplifies communication to reduce inattention.

✅ Overprecise households react more
❌ Underprecise households react less