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Stable behavior and generalized partition

Author

Listed:
  • David Dillenberger

    (University of Pennsylvania)

  • Philipp Sadowski

    (Duke University)

Abstract

Behavior is stable if the ex ante ranking of two acts that differ only on some event I coincides with their ex post ranking upon learning I. We identify the largest class of information structures for which the behavior of a Bayesian expected utility maximizer is stable. We call them generalized partitions and characterize the learning processes they can accommodate. Often, the information structure is not explicitly part of the primitives in the model, and so becomes a subjective parameter. We propose a way to identify how the individual plans to choose contingent on learning an event, and establish that for a Bayesian expected utility maximizer, stable behavior—formulated in terms of this indirectly observed contingent ranking—is a tight characterization of subjective learning via a generalized partition.

Suggested Citation

  • David Dillenberger & Philipp Sadowski, 2019. "Stable behavior and generalized partition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(2), pages 285-302, September.
    • Handle: RePEc:spr:joecth:v:68:y:2019:i:2:d:10.1007_s00199-018-1122-z
    DOI: 10.1007/s00199-018-1122-z
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    References listed on IDEAS

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    Cited by:

    1. Youichiro Higashi & Kazuya Hyogo & Gil Riella, 2020. "Dynamically Consistent Menu Preferences," KIER Working Papers 1047, Kyoto University, Institute of Economic Research.
    2. Takaaki Abe & Satoshi Nakada, 2023. "Core stability of the Shapley value for cooperative games," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 60(4), pages 523-543, May.

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    More about this item

    Keywords

    Bayesian updating; Stable behavior; Subjective expected utility; Subjective learning; Dynamic consistency; Generalized partition;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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