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Preference discovery and experimentation

Author

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  • Cooke, Kevin

    (Department of Economics, Boston University)

Abstract

I provide axiomatic foundations for a model of taste uncertainty with endogenous learning through consumption. In this setting, uncertainty is over an unobservable, subjective state space. Preference over lottery-menu pairs is sufficient to identify the state space and the learning process. In this model, the agent is viewed as if he learns the utility of an object upon its consumption. This information is used to improve choice from the follow-on menu. This implies a trade-off between consumption value and information leading to experimentation. I provide a behavioral definition of experimentation. While the literature focuses on identifying subjective states through a demand for flexibility, I show that experimentation also (partially) identifies taste uncertainty.

Suggested Citation

  • Cooke, Kevin, 2017. "Preference discovery and experimentation," Theoretical Economics, Econometric Society, vol. 12(3), September.
    • Handle: RePEc:the:publsh:2263
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    References listed on IDEAS

    as
    1. Riella, Gil, 2013. "Preference for Flexibility and Dynamic Consistency," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2467-2482.
    2. Piermont, Evan & Takeoka, Norio & Teper, Roee, 2016. "Learning the Krepsian state: Exploration through consumption," Games and Economic Behavior, Elsevier, vol. 100(C), pages 69-94.
    3. Karni, Edi, 2004. "Additive representations over actions and acts," Mathematical Social Sciences, Elsevier, vol. 48(2), pages 113-119, September.
    4. Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
    5. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-577, May.
    6. R. Vijay Krishna & Philipp Sadowski, 2014. "Dynamic Preference for Flexibility," Econometrica, Econometric Society, vol. 82(2), pages 655-703, March.
    7. Dillenberger, David & Lleras, Juan Sebastián & Sadowski, Philipp & Takeoka, Norio, 2014. "A theory of subjective learning," Journal of Economic Theory, Elsevier, vol. 153(C), pages 287-312.
    8. Hyogo, Kazuya, 2007. "A subjective model of experimentation," Journal of Economic Theory, Elsevier, vol. 133(1), pages 316-330, March.
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    Citations

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    Cited by:

    1. Marek Kapera, 2022. "Learning own preferences through consumption," KAE Working Papers 2022-074, Warsaw School of Economics, Collegium of Economic Analysis.
    2. Roee Teper, 2016. "Plans of Action," Working Paper 5859, Department of Economics, University of Pittsburgh.
    3. Jason Delaney & Sarah Jacobson & Thorsten Moenig, 2020. "Preference discovery," Experimental Economics, Springer;Economic Science Association, vol. 23(3), pages 694-715, September.

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    More about this item

    Keywords

    Taste uncertainty; experimentation; endogenous learning; subjective state space; learning through consumption; decision theory;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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