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Bayesian Identification: A Theory for State-Dependent Utilities

Author

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  • Jay Lu

Abstract

We provide a revealed preference methodology for identifying beliefs and utilities that can vary across states. A notion of comparative informativeness is introduced that is weaker than the standard Blackwell ranking. We show that beliefs and state-dependent utilities can be identified using stochastic choice from two informational treatments, where one is strictly more informative than another. Moreover, if the signal structure is known, then stochastic choice from a single treatment is enough for identification. These results illustrate novel identification methodologies unique to stochastic choice. Applications include identifying biases in job hiring, loan approvals, and medical advice.

Suggested Citation

  • Jay Lu, 2019. "Bayesian Identification: A Theory for State-Dependent Utilities," American Economic Review, American Economic Association, vol. 109(9), pages 3192-3228, September.
    • Handle: RePEc:aea:aecrev:v:109:y:2019:i:9:p:3192-3228
    Note: DOI: 10.1257/aer.20171534
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    File URL: https://www.aeaweb.org/doi/10.1257/aer.20171534
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    Citations

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    Cited by:

    1. Jonathan Libgober, 2021. "Identifying Wisdom (of the Crowd): A Regression Approach," Papers 2105.07097, arXiv.org, revised Apr 2023.
    2. Masaki Miyashita, 2024. "Identification of Information Structures in Bayesian Games," Papers 2403.11333, arXiv.org.
    3. Elias Tsakas, 2022. "Belief identification with state-dependent utilities," Papers 2203.10505, arXiv.org, revised Nov 2022.
    4. Mark Whitmeyer, 2024. "Can One Hear the Shape of a Decision Problem?," Papers 2403.06344, arXiv.org, revised Apr 2024.
    5. Wei Ma, 2023. "Random dual expected utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 293-315, February.
    6. Ashesh Rambachan, 2022. "Identifying Prediction Mistakes in Observational Data," NBER Chapters, in: Economics of Artificial Intelligence, National Bureau of Economic Research, Inc.
    7. Wei Wang & Huifu Xu, 2023. "Preference robust state-dependent distortion risk measure on act space and its application in optimal decision making," Computational Management Science, Springer, vol. 20(1), pages 1-51, December.
    8. Elias Tsakas, 2021. "Identification of misreported beliefs," Papers 2112.12975, arXiv.org.
    9. Elias Tsakas, 2023. "Belief identification by proxy," Papers 2311.13394, arXiv.org.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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