A Theory of Subjective Learning
AbstractWe study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst. We derive two utility representations of preferences over menus of acts that capture the individual’s uncertainty about his future beliefs. The most general representation identifies a unique probability distribution over the set of posteriors that the decision maker might face at the time of choosing from the menu. We use this representation to characterize a notion of “more preference for flexibility” via a subjective analogue of Blackwell’s (1951, 1953) comparisons of experiments. A more specialized representation uniquely identifies information as a partition of the state space. This result allows us to compare individuals who expect to learn differently, even if they do not agree on their prior beliefs. We conclude by extending the basic model to accommodate an individual who expects to learn gradually over time by means of a subjective filtration.
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Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-034.
Length: 27 pages
Date of creation: 31 Aug 2012
Date of revision:
Subjective learning; partitional learning; preference for flexibility; resolution of uncertainty; valuing more binary bets; subjective filtration;
Find related papers by JEL classification:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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- Hyogo, Kazuya, 2007. "A subjective model of experimentation," Journal of Economic Theory, Elsevier, vol. 133(1), pages 316-330, March.
- 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.
- Eddie Dekel & Barton L Lipman & Aldo Rustichini & Todd Sarver, 2007. "Representing Preferences with a Unique Subjective State Space: A Corrigendum -super-1," Econometrica, Econometric Society, vol. 75(2), pages 591-600, 03.
- R. Vijay Krishna & Philipp Sadowski, 2012. "Dynamic Preference for Flexibility," Working Papers 12-16, Duke University, Department of Economics.
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