Political decision making with costly and imperfect information

Abstract

In political decision making, a rational actor often faces a complex simultaneous choice problem of gathering costly information and choosing among several risky alternatives. This situation can be modelled as a repeated decision problem in which the decision maker purchases an item of costly information, uses it to update beliefs and then decides whether to purchase more information or to stop and choose the alternative having highest expected utility. The problem is shown to have a well-defined solution, and the effects of differing levels of information costs and risks upon this solution are derived. Applications to the bureaucrat's choice among policy alternatives and to the voter's candidate choice problem are sketched. The model represents a full-rationality foundation for bounded-rationality models of politcal (and other) decision making.