IDEAS home Printed from https://ideas.repec.org/a/wly/iecrev/v60y2019i4p1861-1876.html
   My bibliography  Save this article

Dimensionality And Disagreement: Asymptotic Belief Divergence In Response To Common Information

Author

Listed:
  • Isaac Loh
  • Gregory Phelan

Abstract

We provide a model of boundedly rational, multidimensional learning and characterize when beliefs will converge to the truth. Agents maintain beliefs as marginal probabilities instead of joint probabilities, and agents' information is of lower dimension than the model. As a result, for some observations, agents may face an identification problem affecting the role of data in inference. Beliefs converge to the truth when these observations are rare, but beliefs diverge when observations presenting an identification problem are frequent. Robustly, two agents with differing priors who observe identical, unambiguous information may disagree forever, with stronger disagreement the more information received.

Suggested Citation

  • Isaac Loh & Gregory Phelan, 2019. "Dimensionality And Disagreement: Asymptotic Belief Divergence In Response To Common Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1861-1876, November.
    • Handle: RePEc:wly:iecrev:v:60:y:2019:i:4:p:1861-1876
    DOI: 10.1111/iere.12406
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/iere.12406
    Download Restriction: no
    File URL: https://libkey.io/10.1111/iere.12406?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ignacio Esponda & Demian Pouzo, 2016. "Berk–Nash Equilibrium: A Framework for Modeling Agents With Misspecified Models," Econometrica, Econometric Society, vol. 84, pages 1093-1130, May.
    2. Xavier Gabaix, 2014. "A Sparsity-Based Model of Bounded Rationality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1661-1710.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benoît, Jean-Pierre & Dubra, Juan, 2018. "When do populations polarize? An explanation," MPRA Paper 86173, University Library of Munich, Germany.
    2. Gabriel Martinez & Nicholas H. Tenev, 2020. "Optimal Echo Chambers," Papers 2010.01249, arXiv.org, revised Feb 2024.
    3. Stone, Daniel, 2018. "Just a big misunderstanding? Bias and Bayesian affective polarization," SocArXiv 58sru, Center for Open Science.
    4. Axel Anderson & Nikoloz Pkhakadze, 2023. "Polarizing Persuasion," Working Papers gueconwpa~23-23-04, Georgetown University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kubler, Felix & Scheidegger, Simon, 2023. "Uniformly self-justified equilibria," Journal of Economic Theory, Elsevier, vol. 212(C).
    2. Vedolin, Andrea & Molavi, Pooya & Tahbaz-Salehi, Alireza, 2021. "Model Complexity, Expectations, and Asset Prices," CEPR Discussion Papers 15717, C.E.P.R. Discussion Papers.
    3. Philippe Jehiel, 2022. "Analogy-Based Expectation Equilibrium and Related Concepts:Theory, Applications, and Beyond," PSE Working Papers halshs-03735680, HAL.
    4. Olivier Compte, 2023. "Belief formation and the persistence of biased beliefs," Papers 2310.08466, arXiv.org.
    5. Ignacio Esponda & Emanuel Vespa & Sevgi Yuksel, 2024. "Mental Models and Learning: The Case of Base-Rate Neglect," American Economic Review, American Economic Association, vol. 114(3), pages 752-782, March.
    6. Ignacio Esponda & Demian Pouzo, 2017. "Conditional Retrospective Voting in Large Elections," American Economic Journal: Microeconomics, American Economic Association, vol. 9(2), pages 54-75, May.
    7. Geoffroy de Clippel & Kareen Rozen, 2020. "Relaxed Optimization: e-Rationalizability and the FOC-Departure Index in Consumer Theory," Working Papers 2020-07, Brown University, Department of Economics.
    8. Geoffroy de Clippel & Kareen Rozen, 2018. "Consumer Theory with Misperceived Tastes," Working Papers 2018-10, Brown University, Department of Economics.
    9. repec:osf:osfxxx:vfqy2_v1 is not listed on IDEAS
    10. Joshua Schwartzstein & Adi Sunderam, 2021. "Using Models to Persuade," American Economic Review, American Economic Association, vol. 111(1), pages 276-323, January.
    11. V. Bhaskar & Caroline Thomas, 2019. "The Culture of Overconfidence," American Economic Review: Insights, American Economic Association, vol. 1(1), pages 95-110, June.
    12. Atahan Afsar; José Elías Gallegos; Richard Jaimes; Edgar Silgado Gómez & José Elías Gallegos & Richard Jaimes & Edgar Silgado Gómez, 2020. "Reconciling Empirics and Theory: The Behavioral Hybrid New Keynesian Model," Vniversitas Económica, Universidad Javeriana - Bogotá, vol. 0(0), pages 1-41, December.
    13. Theresa Kuchler & Basit Zafar, 2019. "Personal Experiences and Expectations about Aggregate Outcomes," Journal of Finance, American Finance Association, vol. 74(5), pages 2491-2542, October.
    14. Eliaz, Kfir & Spiegler, Ran, 2022. "On incentive-compatible estimators," Games and Economic Behavior, Elsevier, vol. 132(C), pages 204-220.
    15. Benchimol, Jonathan & Bounader, Lahcen, 2023. "Optimal monetary policy under bounded rationality," Journal of Financial Stability, Elsevier, vol. 67(C).
    16. Quemin, Simon & Trotignon, Raphaël, 2021. "Emissions trading with rolling horizons," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    17. Bartosz Maćkowiak & Filip Matějka & Mirko Wiederholt, 2023. "Rational Inattention: A Review," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 226-273, March.
    18. R. Lardeux, 2018. "Who Understands The French Income Tax? Bunching Where Tax Liabilities Start," Documents de Travail de l'Insee - INSEE Working Papers g2018-04, Institut National de la Statistique et des Etudes Economiques.
    19. Marek Weretka & Daniel Quint, 2022. "Slope-takers in anonymous markets," GRAPE Working Papers 64, GRAPE Group for Research in Applied Economics.
    20. Rema Hanna & Sendhi Mullainathan & Josh Schwartstein, 2012. "Learning Through Noticing: Theory and Experimental Evidence in Farming," CID Working Papers 245, Center for International Development at Harvard University.
    21. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.

    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:iecrev:v:60:y:2019:i:4:p:1861-1876. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.