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A Theory of Subjective Learning, Second Version

Author

Listed:
  • David Dillenberger

    () (Department of Economics, University of Pennsylvania)

  • Juan Sebastian Lleras

    () (Department of Social and Decision Sciences, CMU)

  • Philipp Sadowski

    () (Department of Economics, Duke University)

  • Norio Takeoka

    () (Department of Economics, Yokohama National University)

Abstract

We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst. We elicit subjective information directly from choice behavior by deriving two utility representations of preferences over menus of acts. The most general representation identifies a unique probability distribution over the set of posteriors that the decision maker might face at the time of choosing from the menu. We use this representation to characterize a notion of ”more preference for flexibility” via a subjective analogue of Blackwell’s (1951, 1953) comparisons of experiments. A more specialized representation uniquely identifies information as a partition of the state space. This result allows us to compare individuals who expect to learn differently, even if they do not agree on their prior beliefs. On the extended domain of dated-menus, we show how to accommodate an individual who expects to learn gradually over time by means of a subjective filtration.

Suggested Citation

  • David Dillenberger & Juan Sebastian Lleras & Philipp Sadowski & Norio Takeoka, 2012. "A Theory of Subjective Learning, Second Version," PIER Working Paper Archive 13-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 18 Mar 2013.
  • Handle: RePEc:pen:papers:13-014
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    File URL: http://economics.sas.upenn.edu/system/files/13-014.pdf
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    References listed on IDEAS

    as
    1. Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
    2. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-577, May.
    3. Hyogo, Kazuya, 2007. "A subjective model of experimentation," Journal of Economic Theory, Elsevier, vol. 133(1), pages 316-330, March.
    4. Eddie eckel & Barton L Lipman & Aldo Rustichini & Todd Sarver, 2005. "Representing Preferences with a Unique Subjective State Space: Corrigendum," Boston University - Department of Economics - Working Papers Series WP2005-042, Boston University - Department of Economics.
    5. Takeoka, Norio, 2007. "Subjective probability over a subjective decision tree," Journal of Economic Theory, Elsevier, vol. 136(1), pages 536-571, September.
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    Citations

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    Cited by:

    1. Higashi, Youichiro & Hyogo, Kazuya & Takeoka, Norio, 2014. "Stochastic endogenous time preference," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 77-92.
    2. Riella, Gil, 2013. "Preference for Flexibility and Dynamic Consistency," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2467-2482.

    More about this item

    Keywords

    Subjective learning; partitional learning; preference for flexibility; resolution of uncertainty; valuing more binary bets; subjective filtration; dated-menus;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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