A Theory of Subjective Learning, Third Version
32 Pages Posted: 4 Dec 2013
Date Written: September 3, 2013
We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst. We elicit subjective information directly from choice behavior by deriving two utility representations of preferences over menus of acts. One representation uniquely identifies information as a probability measure over posteriors and the other identifies information as a partition of the state space. We compare individuals who expect to learn differently in terms of their preference for flexibility. On the extended domain of dated-menus, we show how to accommodate gradual learning over time by means of a subjective filtration.
Keywords: subjective learning, partitional learning, preference for flexibility, resolution of uncertainty, valuing more binary bets, subjective filtration, dated-menus
JEL Classification: D80, D81, D82
Suggested Citation: Suggested Citation