  In this semi-tutorial paper, we first review the information-theoretic
approach to account for the computational costs incurred during the search for
optimal actions in a sequential decision-making problem. The traditional (MDP)
framework ignores computational limitations while searching for optimal
policies, essentially assuming that the acting agent is perfectly rational and
aims for exact optimality. Using the free-energy, a variational principle is
introduced that accounts not only for the value of a policy alone, but also
considers the cost of finding this optimal policy. The solution of the
variational equations arising from this formulation can be obtained using
familiar Bellman-like value iterations from dynamic programming (DP) and the
Blahut-Arimoto (BA) algorithm from rate distortion theory. Finally, we
demonstrate the utility of the approach for generating hierarchies of state
abstractions that can be used to best exploit the available computational
resources. A numerical example showcases these concepts for a path-planning
problem in a grid world environment.
