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Models of Subjective Learning

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  • David Dillenberger

    () (Department of Economics, University of Pennsylvania)

  • Philipp Sadowski

    () (Department of Economics, Duke University)

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    Abstract

    We study a decision maker who faces a dynamic decision problem in which the process of information arrival is subjective. By studying preferences over menus of acts, we derive a sequence of utility representations that captures the decision maker’s uncertainty about the beliefs he will hold when choosing from a menu. In the most general model of second-order beliefs, we characterize a notion of "more preference for flexibility" via a subjective analogue of Blackwell’s (1951, 1953) comparisons of experiments. We proceed to analyze a model in which signals are subsets of the state space. The corresponding representation enables us to compare the behavior of two decision makers who expect to learn differently, even if they do not agree on their prior beliefs. The class of information systems that can support such a representation generalizes the notion of modeling information as a partition of the state space. We apply the model to study a decision maker who anticipates subjective uncertainty to be resolved gradually over time. We derive a representation that uniquely identifies both the filtration, which is the timing of information arrival with the sequence of partitions it induces, and the decision maker’s prior beliefs.

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    File URL: http://economics.sas.upenn.edu/system/files/11-042.pdf
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    Bibliographic Info

    Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 11-042.

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    Length: 39 pages
    Date of creation: 12 Dec 2011
    Date of revision:
    Handle: RePEc:pen:papers:11-042

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    Related research

    Keywords: Resolution of uncertainty; second-order beliefs; preference for flexibility; valuing binary bets more; generalized partition.;

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    1. Higashi, Youichiro & Hyogo, Kazuya & Takeoka, Norio, 2009. "Subjective random discounting and intertemporal choice," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1015-1053, May.
    2. Hyogo, Kazuya, 2007. "A subjective model of experimentation," Journal of Economic Theory, Elsevier, vol. 133(1), pages 316-330, March.
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