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Prolonged Learning and Hasty Stopping: The Wald Problem with Ambiguity

Author

Listed:
  • Sarah Auster
  • Yeon-Koo Che
  • Konrad Mierendorff

Abstract

This paper studies sequential information acquisition by an ambiguity-averse decision-maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prior. We show that the consideration of ambiguity gives rise to rich dynamics: compared to the Bayesian DM, the DM here tends to experiment excessively when facing modest uncertainty and, to counteract it, may stop experimenting prematurely when facing high uncertainty. In the latter case, the DM's stopping rule is nonmonotonic in beliefs and features randomized stopping.

Suggested Citation

  • Sarah Auster & Yeon-Koo Che & Konrad Mierendorff, 2024. "Prolonged Learning and Hasty Stopping: The Wald Problem with Ambiguity," American Economic Review, American Economic Association, vol. 114(2), pages 426-461, February.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:2:p:426-61
    DOI: 10.1257/aer.20221149
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    Cited by:

    1. Sarah Auster & Christian Kellner, 2023. "Timing Decisions Under Model Uncertainty," CRC TR 224 Discussion Paper Series crctr224_2023_460, University of Bonn and University of Mannheim, Germany.
    2. Martino Banchio & Suraj Malladi, 2025. "Rediscovery," Papers 2504.19761, arXiv.org.
    3. Dong Yan & Charles Sims, 2025. "Irreversible Adaptation and Knightian Climate Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(3), pages 681-707, March.
    4. Sarah Auster & Christian Kellner, 2023. "Timing Decisions under Model Uncertainty," ECONtribute Discussion Papers Series 252, University of Bonn and University of Cologne, Germany.

    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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