Dimensionality and Disagreement: Asymptotic Belief Divergence in Response to Common Information

Isaac Loh and Gregory Phelan
Additional contact information
Isaac Loh: Northwestern University

No 2016-18, Department of Economics Working Papers from Department of Economics, Williams College

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 rather than 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.

Keywords: Heterogeneous beliefs; divergence; learning; Bayesian updating; bounded rationality; sparsity (search for similar items in EconPapers)
JEL-codes: D10 D80 D84 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2016-12, Revised 2019-01
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming in the International Economic Review.

Downloads: (external link)
https://web.williams.edu/Economics/wp/LohPhelanDim ... greement_Jan2019.pdf Full text (application/pdf)

Related works:
Journal Article: DIMENSIONALITY AND DISAGREEMENT: ASYMPTOTIC BELIEF DIVERGENCE IN RESPONSE TO COMMON INFORMATION (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wil:wileco:2016-18

Ordering information: This working paper can be ordered from

The price is Free.

Access Statistics for this paper

More papers in Department of Economics Working Papers from Department of Economics, Williams College Williamstown, MA 01267. Contact information at EDIRC.
Bibliographic data for series maintained by Greg Phelan ().