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Optimal Dynamic Information Acquisition

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  • Weijie Zhong

Abstract

I study a dynamic model in which a decision‐maker (DM) acquires information about the payoffs of different alternatives prior to making a decision. The model's key feature is the flexibility of information: the DM can choose any dynamic signal process as an information source, subject to a flow cost that depends on the informativeness of the signal. Under the optimal policy, the DM acquires a signal that arrives according to a Poisson process. The optimal Poisson signal confirms the DM's prior belief and is sufficiently precise to warrant immediate action. Over time, given the absence of the arrival of a Poisson signal, the DM continues seeking an increasingly precise but less frequent Poisson signal.

Suggested Citation

  • Weijie Zhong, 2022. "Optimal Dynamic Information Acquisition," Econometrica, Econometric Society, vol. 90(4), pages 1537-1582, July.
    • Handle: RePEc:wly:emetrp:v:90:y:2022:i:4:p:1537-1582
    DOI: 10.3982/ECTA17787
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    References listed on IDEAS

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    Cited by:

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    2. Li, Anqi & Hu, Lin, 2023. "Electoral accountability and selection with personalized information aggregation," Games and Economic Behavior, Elsevier, vol. 140(C), pages 296-315.

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