Generalized Partition and Subjective Filtration

30 Pages Posted: 14 Sep 2012

See all articles by David Dillenberger

David Dillenberger

University of Pennsylvania - Department of Economics

Philipp Sadowski

Duke University - Department of Economics

Date Written: September 13, 2012

Abstract

We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst, and hence should be identified from observed choice data. An information structure is objectively describable if signals correspond to events of the objective state space. We derive a representation of preferences over menus of acts that captures the behavior of a Bayesian decision maker who expects to receive such signals. The class of information structures that can support such a representation generalizes the notion of a partition of the state space. The representation allows us to compare individuals in terms of the preciseness of their information structures without requiring that they share the same prior beliefs. 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, valuing binary bets more, generalized partition, subjective filtration

JEL Classification: D80, D81, D83

Suggested Citation

Dillenberger, David and Sadowski, Philipp, Generalized Partition and Subjective Filtration (September 13, 2012). PIER Working Paper 12-036; Economic Research Initiatives at Duke (ERID) Working Paper No. 132. Available at SSRN: https://ssrn.com/abstract=2146710 or http://dx.doi.org/10.2139/ssrn.2146710

David Dillenberger (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
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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