Inattentive importers

@inproceedings{Dasgupta2013InattentiveI,
  title={Inattentive importers},
  author={K. S. Dasgupta and Jordi Mondria},
  year={2013}
}
Importers rarely observe the price of every good in every market because of information frictions. In this paper, we seek to explain how the presence of such frictions shape the flow of goods between countries. To this end, we introduce rationally inattentive importers in a multi-country Ricardian trade model. Under specific assumptions about preferences and technology, we provide an information-theoretical foundation of the gravity equation that links bilateral trade flows with the cost of… CONTINUE READING

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