IDEAS home Printed from https://ideas.repec.org/p/hal/psewpa/halshs-02183450.html
   My bibliography  Save this paper

Selective Sampling with Information-Storage Constraints

Author

Listed:
  • Philippe Jehiel

    (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UCL - Department of Medical Physics and Biomedical Engineering - UCL - University College of London [London])

  • Jakub Steiner

    (UZH - University of Zürich [Zürich], CERGE-EI - Charles University [Prague])

Abstract

A memoryless agent can acquire arbitrarily many signals. After each signal observation, she either terminates and chooses an action, or she discards her observation and draws a new signal. By conditioning the probability of termination on the information collected, she controls the correlation between the payo_ state and her terminal action. We provide an optimality condition for the emerging stochastic choice. The condition highlights the bene_ts of selective memory applied to the extracted signals. Implications|obtained in a simple class of binary problems| include (i) confirmation bias, (ii) speed-accuracy complementarity, (iii) overweighting of rare events, and (iv) salience effect.

Suggested Citation

  • Philippe Jehiel & Jakub Steiner, 2019. "Selective Sampling with Information-Storage Constraints," PSE Working Papers halshs-02183450, HAL.
  • Handle: RePEc:hal:psewpa:halshs-02183450
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-02183450
    as

    Download full text from publisher

    File URL: https://halshs.archives-ouvertes.fr/halshs-02183450/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mel Win Khaw & Ziang Li & Michael Woodford, 2017. "Risk Aversion as a Perceptual Bias," CESifo Working Paper Series 6416, CESifo.
    2. Drew Fudenberg & Philipp Strack & Tomasz Strzalecki, 2018. "Speed, Accuracy, and the Optimal Timing of Choices," American Economic Review, American Economic Association, vol. 108(12), pages 3651-3684, December.
    3. Gabaix, Xavier & Laibson, David, 2017. "Myopia and Discounting," CEPR Discussion Papers 11914, C.E.P.R. Discussion Papers.
    4. Jakub Steiner & Colin Stewart & Filip Matějka, 2017. "Rational Inattention Dynamics: Inertia and Delay in Decision‐Making," Econometrica, Econometric Society, vol. 85, pages 521-553, March.
    5. Margaret A. Meyer, 1991. "Learning from Coarse Information: Biased Contests and Career Profiles," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 15-41.
    6. Philippe Jehiel, 2018. "Investment Strategy and Selection Bias: An Equilibrium Perspective on Overoptimism," American Economic Review, American Economic Association, vol. 108(6), pages 1582-1597, June.
    7. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
    8. Filip Matêjka & Alisdair McKay, 2015. "Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model," American Economic Review, American Economic Association, vol. 105(1), pages 272-298, January.
    9. James Dow, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 1-14.
    10. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2012. "Salience Theory of Choice Under Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1243-1285.
    11. Wing Suen, 2004. "The Self-Perpetuation of Biased Beliefs," Economic Journal, Royal Economic Society, vol. 114(495), pages 377-396, April.
    12. Matthew Gentzkow & Jesse M. Shapiro, 2006. "Media Bias and Reputation," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 280-316, April.
    13. Piccione, Michele & Rubinstein, Ariel, 1997. "On the Interpretation of Decision Problems with Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 3-24, July.
    14. Nick Netzer, 2009. "Evolution of Time Preferences and Attitudes toward Risk," American Economic Review, American Economic Association, vol. 99(3), pages 937-955, June.
    15. Peter W. Glynn & Donald L. Iglehart, 1989. "Importance Sampling for Stochastic Simulations," Management Science, INFORMS, vol. 35(11), pages 1367-1392, November.
    16. Hebert, Benjamin & Woodford, Michael, 2018. "Rational Inattention with Continuous Time," Research Papers 3457, Stanford University, Graduate School of Business.
    17. Andrew Caplin & Mark Dean & John Leahy, 2017. "Rationally Inattentive Behavior: Characterizing and Generalizing Shannon Entropy," NBER Working Papers 23652, National Bureau of Economic Research, Inc.
    18. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
    19. Andrew Caplin & Mark Dean, 2015. "Revealed Preference, Rational Inattention, and Costly Information Acquisition," American Economic Review, American Economic Association, vol. 105(7), pages 2183-2203, July.
    20. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    21. Andrea Wilson, 2014. "Bounded Memory and Biases in Information Processing," Econometrica, Econometric Society, vol. 82, pages 2257-2294, November.
    22. de Oliveira, Henrique & Denti, Tommaso & Mihm, Maximilian & Ozbek, Kemal, 2017. "Rationally inattentive preferences and hidden information costs," Theoretical Economics, Econometric Society, vol. 12(2), May.
    23. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
    24. Matthew Rabin & Joel L. Schrag, 1999. "First Impressions Matter: A Model of Confirmatory Bias," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 37-82.
    25. Luis Rayo & Gary S. Becker, 2007. "Evolutionary Efficiency and Happiness," Journal of Political Economy, University of Chicago Press, vol. 115, pages 302-337.
    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. Leung, Benson Tsz Kin, 2020. "Limited cognitive ability and selective information processing," Games and Economic Behavior, Elsevier, vol. 120(C), pages 345-369.

    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. Jehiel, Philippe & Steiner, Jakub, 2017. "On Second Thoughts, Selective Memory, and Resulting Behavioral Biases," CEPR Discussion Papers 12546, C.E.P.R. Discussion Papers.
    2. Xavier Gabaix, 2017. "Behavioral Inattention," NBER Working Papers 24096, National Bureau of Economic Research, Inc.
    3. Adriani, Fabrizio & Sonderegger, Silvia, 2020. "Optimal similarity judgments in intertemporal choice (and beyond)," Journal of Economic Theory, Elsevier, vol. 190(C).
    4. Olivier Gossner & Jakub Steiner, 2016. "Optimal Illusion of Control and Related Perception Biases," Edinburgh School of Economics Discussion Paper Series 276, Edinburgh School of Economics, University of Edinburgh.
    5. Gossner, Olivier & Steiner, Jakub, 2018. "On the cost of misperception: General results and behavioral applications," Journal of Economic Theory, Elsevier, vol. 177(C), pages 816-847.
    6. Mogens Fosgerau & Emerson Melo & André de Palma & Matthew Shum, 2020. "Discrete Choice And Rational Inattention: A General Equivalence Result," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1569-1589, November.
    7. Nimark, Kristoffer P. & Sundaresan, Savitar, 2019. "Inattention and belief polarization," Journal of Economic Theory, Elsevier, vol. 180(C), pages 203-228.
    8. Luciano Pomatto & Philipp Strack & Omer Tamuz, 2018. "The cost of information," Papers 1812.04211, arXiv.org, revised Dec 2020.
    9. Tsakas, Elias, 2018. "Robust scoring rules," Research Memorandum 023, Maastricht University, Graduate School of Business and Economics (GSBE).
    10. Tsakas, Elias, 0. "Robust scoring rules," Theoretical Economics, Econometric Society.
    11. Ellis, Andrew, 2018. "Foundations for optimal inattention," Journal of Economic Theory, Elsevier, vol. 173(C), pages 56-94.
    12. Mackowiak, Bartosz Adam & Matejka, Filip & Wiederholt, Mirko, 2018. "Survey: Rational Inattention, a Disciplined Behavioral Model," CEPR Discussion Papers 13243, C.E.P.R. Discussion Papers.
    13. Weijie Zhong, 2018. "The Indirect Cost of Information," Papers 1809.00697, arXiv.org, revised Apr 2020.
    14. Matysková, Ludmila & Rogers, Brian & Steiner, Jakub & Sun, Keh-Kuan, 2020. "Habits as adaptations: An experimental study," Games and Economic Behavior, Elsevier, vol. 122(C), pages 391-406.
    15. Guo, Liang, 2021. "Contextual deliberation and the choice-valuation preference reversal," Journal of Economic Theory, Elsevier, vol. 195(C).
    16. David Walker-Jones, 2019. "Rational Inattention and Perceptual Distance," Papers 1909.00888, arXiv.org, revised Dec 2019.
    17. Jakub Steiner & Colin Stewart & Filip Matějka, 2017. "Rational Inattention Dynamics: Inertia and Delay in Decision‐Making," Econometrica, Econometric Society, vol. 85, pages 521-553, March.
    18. Benjamin Hébert & Michael Woodford, 2017. "Rational Inattention and Sequential Information Sampling," NBER Working Papers 23787, National Bureau of Economic Research, Inc.
    19. Andrew Caplin & Dániel Csaba & John Leahy & Oded Nov, 2018. "Rational Inattention, Competitive Supply, and Psychometrics," NBER Working Papers 25224, National Bureau of Economic Research, Inc.
    20. Andrew Caplin & Mark Dean & John Leahy, 2017. "Rationally Inattentive Behavior: Characterizing and Generalizing Shannon Entropy," NBER Working Papers 23652, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    bounded rationality; information processing; stochastic choice; confirmation bias; speed-accuracy complementarity; probability weighting; salience;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • 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
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hal:psewpa:halshs-02183450. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.