Inattentive Network: Evidence and Theory

15:30-17:00, Friday, April 26, 2024

I-206, Boxue Building, DUFE

Dr. Minghao Li is now an Assistant Professor of Economics at National School of Development, Peking University. He earned his Ph.D. in Economics from Yale University in 2020. His research interests include Macreconomics and Monetary economics.

In this paper, we provide novel evidence on firms' attention allocation in a production network. Based on internet traffic log files collected by EDGAR, we construct a firm-level panel that measures firms' browsing intensity on other firms' electronically filed reports. We find that: (1) firms pay more attention to other firms that are closer to themselves in terms of network distance; (2) firms pay more attention to other firms that are more volatile; (3) a firm's absolute forecast error decreases in its total browsing activities. We then build a framework where firms rationally acquire information to set prices in a production network. The model's predictions on firms' attention allocation are consistent with the empirical patterns. In this framework, we show that the optimal monetary policy design significantly differs from that in a model where informational frictions are exogenously given.

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