Switching Cost Models as Hypothesis Tests

Author: 

Cohen, S
Henckel, T
Menzies, G
Muhle-Karbe, J
Zizzo, D

Publication Date: 

22 November 2018

Journal: 

Economics Letters

Last Updated: 

2021-04-09T16:57:45.93+01:00

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.

Symplectic id: 

911976

Download URL: 

Submitted to ORA: 

Submitted

Publication Type: 

Journal Article