Subjective Learning, Second Version

40 Pages Posted: 8 Mar 2012 Last revised: 20 Mar 2012

David Dillenberger

University of Pennsylvania - Department of Economics

Philipp Sadowski

Duke University - Department of Economics

Date Written: March 7, 2012

Abstract

We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst. We derive a sequence of representations of preferences over menus of acts that capture the individual's uncertainty about his future beliefs. Using the most general representation, we characterize a notion of "more preference for fllexibility" via a subjective analogue of Blackwell's (1951, 1953) comparisons of experiments. A more refined representation allows us to compare individuals who expect to learn differently, even if they do not agree on their prior beliefs. The class of information structures that can support such a representation generalizes the notion of a partition of the state space. We apply the model to study an individual who anticipates gradual resolution of uncertainty over time. Both the filtration (the timing of information arrival with the sequence of partitions it induces) and prior beliefs are uniquely identified.

Keywords: Resolution of uncertainty, second-order beliefs, preference for flexibility, valuing binary bets more, generalized partition, subjective filtration

JEL Classification: D80, D81

Suggested Citation

Dillenberger, David and Sadowski, Philipp, Subjective Learning, Second Version (March 7, 2012). PIER Working Paper No. 12-007. Available at SSRN: https://ssrn.com/abstract=2017595 or http://dx.doi.org/10.2139/ssrn.2017595

David Dillenberger (Contact Author)

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-1503 (Phone)

Philipp Sadowski

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1800 (Phone)

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