Subjective Dynamics Information Constraints

David Dillenberger (), R. Vijay Krishna () and Philipp Sadowski ()
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David Dillenberger: Department of Economics, University of Pennsylvania
R. Vijay Krishna: Department of Economics, Florida State University
Philipp Sadowski: Department of Economics, Duke University

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We axiomatize a new class of recursive dynamic models that capture subjective constraints on the amount of information a decision maker can obtain, pay attention to, or absorb, via a Markov Decision Process for Information Choice (MIC). An MIC is a subjective decision process that specifies what type of information about the payoff-relevant state is feasible in the current period, and how the choice of what to learn now affects what can be learned in the future. The constraint imposed by the MIC is identified from choice behavior up to a recursive extension of Blackwell dominance. All the other parameters of the model, namely the anticipated evolution of the payoff-relevant state, state dependent consumption utilities, and the discount factor are also uniquely identified.

Keywords: Dynamic Preferences; Recursive Information Constraints; Recursive Blackwell Dominance; Rational Inattention; Subjective Markov Decision Process; Familiarity Bias (search for similar items in EconPapers)
JEL-codes: D80 D81 D90 (search for similar items in EconPapers)
Pages: 82 pages
Date: 2016-04-01, Revised 2016-09-01
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:16-011

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