Models of Subjective Learning

David Dillenberger () and Philipp Sadowski ()
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David Dillenberger: Department of Economics, University of Pennsylvania
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 study a decision maker who faces a dynamic decision problem in which the process of information arrival is subjective. By studying preferences over menus of acts, we derive a sequence of utility representations that captures the decision maker’s uncertainty about the beliefs he will hold when choosing from a menu. In the most general model of second-order beliefs, we characterize a notion of "more preference for flexibility" via a subjective analogue of Blackwell’s (1951, 1953) comparisons of experiments. We proceed to analyze a model in which signals are subsets of the state space. The corresponding representation enables us to compare the behavior of two decision makers who expect to learn differently, even if they do not agree on their prior beliefs. The class of information systems that can support such a representation generalizes the notion of modeling information as a partition of the state space. We apply the model to study a decision maker who anticipates subjective uncertainty to be resolved gradually over time. We derive a representation that uniquely identifies both the filtration, which is the timing of information arrival with the sequence of partitions it induces, and the decision maker’s prior beliefs.

Keywords: Resolution of uncertainty; second-order beliefs; preference for flexibility; valuing binary bets more; generalized partition. (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-12-12
New Economics Papers: this item is included in nep-mic
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