Estimating Bayesian Decision Problems with Heterogeneous Priors
CAMA Working Paper 18/2013
26 Pages Posted: 19 Jul 2013
Date Written: April 2013
In many areas of economics there is a growing interest in how expertise and preferences drive individual and group decision making under uncertainty. Increasingly, we wish to estimate such models to quantify which of these drive decision making. In this paper we propose a new channel through which we can empirically identify expertise and preference parameters by using variation in decisions over heterogeneous priors. Relative to existing estimation approaches, our "Prior Based Identification" extends the possible environments which can be estimated, and also substantially improves the accuracy and precision of estimates in those environments which can be estimated using existing methods.
Keywords: Bayesian decision making, expertise, preferences, estimation
JEL Classification: D72, D81, C13
Suggested Citation: Suggested Citation