Subjective Learning, Second Version
40 Pages Posted: 8 Mar 2012 Last revised: 20 Mar 2012
Date Written: March 7, 2012
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: Suggested Citation