IDEAS home Printed from https://ideas.repec.org/a/the/publsh/3994.html
   My bibliography  Save this article

Robust sequential search

Author

Listed:
  • Schlag, Karl H.

    (Department of Economics, University of Vienna)

  • Zapechelnyuk, Andriy

    (School of Economics and Finance, University of St Andrews)

Abstract

We study sequential search without priors. Our interest lies in decision rules that are close to being optimal under each prior and after each history. We call these rules robust. The search literature employs optimal rules based on cutoff strategies, and these rules are not robust. We derive robust rules and show that their performance exceeds 1/2 of the optimum against binary i.i.d. environments and 1/4 of the optimum against all i.i.d. environments. This performance improves substantially with the outside option value, for instance, it exceeds 2/3 of the optimum if the outside option exceeds 1/6 of the highest possible alternative.

Suggested Citation

  • Schlag, Karl H. & Zapechelnyuk, Andriy, 2021. "Robust sequential search," Theoretical Economics, Econometric Society, vol. 16(4), November.
    • Handle: RePEc:the:publsh:3994
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20211431/32389/928
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alexei Parakhonyak & Anton Sobolev, 2015. "Non‐Reservation Price Equilibrium and Search without Priors," Economic Journal, Royal Economic Society, vol. 0(584), pages 887-909, May.
    2. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    3. Klibanoff, Peter & Marinacci, Massimo & Mukerji, Sujoy, 2009. "Recursive smooth ambiguity preferences," Journal of Economic Theory, Elsevier, vol. 144(3), pages 930-976, May.
    4. Dirk Bergemann & Stephen Morris, 2012. "Robust Mechanism Design," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 2, pages 49-96, World Scientific Publishing Co. Pte. Ltd..
    5. Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2006. "Dynamic variational preferences," Journal of Economic Theory, Elsevier, vol. 128(1), pages 4-44, May.
    6. Georgia Perakis & Guillaume Roels, 2008. "Regret in the Newsvendor Model with Partial Information," Operations Research, INFORMS, vol. 56(1), pages 188-203, February.
    7. ,, 2011. "Dynamic choice under ambiguity," Theoretical Economics, Econometric Society, vol. 6(3), September.
    8. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-180, January.
    9. Atsushi Kajii & Stephen Morris, 1997. "The Robustness of Equilibria to Incomplete Information," Econometrica, Econometric Society, vol. 65(6), pages 1283-1310, November.
    10. Stoye, Jörg, 2009. "Minimax regret treatment choice with finite samples," Journal of Econometrics, Elsevier, vol. 151(1), pages 70-81, July.
    11. Janssen, Maarten C.W. & Parakhonyak, Alexei & Parakhonyak, Anastasia, 2017. "Non-reservation price equilibria and consumer search," Journal of Economic Theory, Elsevier, vol. 172(C), pages 120-162.
    12. Karl Schlag, 2006. "ELEVEN - Tests needed for a Recommendation," Economics Working Papers ECO2006/2, European University Institute.
    13. Carrasco, Vinicius & Farinha Luz, Vitor & Kos, Nenad & Messner, Matthias & Monteiro, Paulo & Moreira, Humberto, 2018. "Optimal selling mechanisms under moment conditions," Journal of Economic Theory, Elsevier, vol. 177(C), pages 245-279.
    14. Joseph L. Gastwirth, 1976. "On Probabilistic Models of Consumer Search for Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 38-50.
    15. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-654, May.
    16. Frank Riedel, 2009. "Optimal Stopping With Multiple Priors," Econometrica, Econometric Society, vol. 77(3), pages 857-908, May.
    17. Lars Peter Hansen & Thomas J Sargent, 2014. "Robust Control and Model Uncertainty," World Scientific Book Chapters, in: UNCERTAINTY WITHIN ECONOMIC MODELS, chapter 5, pages 145-154, World Scientific Publishing Co. Pte. Ltd..
    18. Charles F. Manski, 2004. "Statistical Treatment Rules for Heterogeneous Populations," Econometrica, Econometric Society, vol. 72(4), pages 1221-1246, July.
    19. Sylvain Chassang, 2013. "Calibrated Incentive Contracts," Econometrica, Econometric Society, vol. 81(5), pages 1935-1971, September.
    20. Gabriel Carroll, 2015. "Robustness and Linear Contracts," American Economic Review, American Economic Association, vol. 105(2), pages 536-563, February.
    21. Prasad Kislaya, 2003. "Non-robustness of some economic models," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-9, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kasberger, Bernhard & Woodward, Kyle, 2021. "Bidding in Multi-Unit Auctions under Limited Information," MPRA Paper 111185, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Saghafian, Soroush, 2018. "Ambiguous partially observable Markov decision processes: Structural results and applications," Journal of Economic Theory, Elsevier, vol. 178(C), pages 1-35.
    2. Daniele Pennesi, 2013. "Asset Prices in an Ambiguous Economy," Carlo Alberto Notebooks 315, Collegio Carlo Alberto.
    3. Hansen, Peter G., 2022. "New formulations of ambiguous volatility with an application to optimal dynamic contracting," Journal of Economic Theory, Elsevier, vol. 199(C).
    4. Bhattacharjee, Swagata, 2022. "Dynamic contracting for innovation under ambiguity," Games and Economic Behavior, Elsevier, vol. 132(C), pages 534-552.
    5. Farzad Pourbabaee, 2021. "Robust Experimentation in the Continuous Time Bandit Problem," Papers 2104.00102, arXiv.org.
    6. Carroll, Gabriel, 2016. "Informationally robust trade and limits to contagion," Journal of Economic Theory, Elsevier, vol. 166(C), pages 334-361.
    7. Peter G. Hansen, 2021. "New Formulations of Ambiguous Volatility with an Application to Optimal Dynamic Contracting," Papers 2101.12306, arXiv.org.
    8. Swagata Bhattacharjee, 2019. "Dynamic Contracting for Innovation Under Ambiguity," Working Papers 1022, Ashoka University, Department of Economics, revised Aug 2019.
    9. Li, Jian, 2019. "The K-armed bandit problem with multiple priors," Journal of Mathematical Economics, Elsevier, vol. 80(C), pages 22-38.
    10. Isaiah Andrews & Jesse M. Shapiro, 2021. "A Model of Scientific Communication," Econometrica, Econometric Society, vol. 89(5), pages 2117-2142, September.
    11. Karl Schlag & Andriy Zapechelnyuk, 2017. "Robust Sequential Search," Discussion Paper Series, School of Economics and Finance 201803, School of Economics and Finance, University of St Andrews, revised 05 Mar 2020.
    12. Aleksey Tetenov, 2016. "An economic theory of statistical testing," CeMMAP working papers CWP50/16, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    13. Charles F. Manski & Aleksey Tetenov, 2015. "Clinical trial design enabling ε-optimal treatment rules," CeMMAP working papers 60/15, Institute for Fiscal Studies.
    14. Barron, Daniel & Georgiadis, George & Swinkels, Jeroen M., 2020. "Optimal contracts with a risk-taking agent," Theoretical Economics, Econometric Society, vol. 15(2), May.
    15. Jianjun Miao & Alejandro Rivera, 2016. "Robust Contracts in Continuous Time," Econometrica, Econometric Society, vol. 84, pages 1405-1440, July.
    16. Farzad Pourbabaee, 2022. "Robust experimentation in the continuous time bandit problem," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 151-181, February.
    17. Jose Luis Montiel Olea & Pietro Ortoleva & Mallesh M Pai & Andrea Prat, 2019. "Competing Models," Papers 1907.03809, arXiv.org, revised Nov 2021.
    18. Kristóf Madarász & Andrea Prat, 2017. "Sellers with Misspecified Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(2), pages 790-815.
    19. Ghosh, Gagan & Liu, Heng, 2021. "Sequential auctions with ambiguity," Journal of Economic Theory, Elsevier, vol. 197(C).
    20. Christian Traeger, 2014. "Why uncertainty matters: discounting under intertemporal risk aversion and ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(3), pages 627-664, August.

    More about this item

    Keywords

    Sequential search; search without priors; robustness; dynamic consistency; competitive ratio;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:the:publsh:3994. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin J. Osborne (email available below). General contact details of provider: http://econtheory.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.