Switching cost models as hypothesis tests
Vol:
40/2018
Year:
2018
Month:
September
Abstract:
We relate models based on costs of switching beliefs (e.g. due to inattention) to hypothesis tests. Specifically, for an inference problem with a penalty for mistakes and for switching the inferred value, a band of inaction is optimal. We show this band is equivalent to a confidence interval, and therefore to a two-sided hypothesis test.
Publication file:
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