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Bayesian Identification: A Theory for State-Dependent Utilities


  • Jay Lu


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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    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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