Learning and self-confirming long-run biases

Pierpaolo Battigalli (), A. Francetich, G. Lanzani and Massimo Marinacci

Journal of Economic Theory, 2019, vol. 183, issue C, 740-785

Abstract: We consider an ambiguity averse, sophisticated decision maker facing a recurrent decision problem where information is generated endogenously. In this context, we study self-confirming actions as the outcome of a process of active experimentation. We provide inter alia a learning foundation for self-confirming equilibrium with model uncertainty (Battigalli et al., 2015), and we analyze the impact of changes in ambiguity attitudes on convergence to self-confirming equilibria. We identify conditions under which the set of self-confirming equilibrium actions is invariant to changes in ambiguity attitudes, and yet ambiguity aversion may affect the dynamics. Indeed, we argue that ambiguity aversion tends to stifle experimentation, increasing the likelihood that the decision maker gets stuck into suboptimal “certainty traps.”

Keywords: Learning; Stochastic control; Ambiguity aversion; Self-confirming equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D81 D83 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053119300754
Full text for ScienceDirect subscribers only

Related works:
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:eee:jetheo:v:183:y:2019:i:c:p:740-785

DOI: 10.1016/j.jet.2019.07.009

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().