Learn Without Counterfactuals

Friederike Mengel and Javier Rivas

No 10/15, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: In this paper we study learning procedures when counterfactuals (payo s of not-chosen actions) are not observed. The decision maker reasons in two steps: First, she updates her propensities for each action after every payo experience, where propensity is de ned as how much she prefers each action. Then, she transforms these propensities into choice probabilities. We introduce natural axioms in the way propensities are updated and the way propensities are translated into choice, and study the decision marker's behavior when such axioms are in place.

Keywords: Adaptive Learning; Counterfactuals; Partial Information; Reinforcement Learning (search for similar items in EconPapers)
JEL-codes: D83 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-cbe and nep-dcm
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