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Identification and welfare evaluation in sequential sampling models

Jetlir Duraj () and Yi-Hsuan Lin ()
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Jetlir Duraj: University of Pittsburgh
Yi-Hsuan Lin: Institute of Economics, Academia Sinica

Theory and Decision, 2022, vol. 92, issue 2, No 7, 407-431

Abstract: Abstract Consider an agent who faces choice problems and learns information about an objective state of the world through a technology of sequential experiments. We consider two cases of learning costs. In the first, the agent discounts future payoffs geometrically. In the second, she incurs a constant flow cost of time. If the observable data consist only of the joint distributions over chosen actions and decision times, an analyst can uniquely identify the discount factor in the first case and the flow cost of time in the second case. Moreover, we show how an analyst can recover the agent’s ex ante welfare in both cases, besides identifying her prior belief. Our approach does not rely on any knowledge about the underlying sequential experiment.

Keywords: Sequential sampling; Random choice; Decision time; Information costs; Discount factor (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11238-021-09826-z

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