Diversified Learning: Bayesian Control with Multiple Biased Information Sources

42 Pages Posted: 25 Oct 2024

See all articles by Jussi Keppo

Jussi Keppo

National University of Singapore (NUS) - NUS Business School

Michael Jong Kim

Sauder School of Business, University of British Columbia

Xinyuan Zhang

Sauder School of Business, University of British Columbia

Date Written: October 23, 2024

Abstract

We consider a decision-maker (DM) who can acquire signals from multiple biased information sources to learn about a hidden state before making an earning decision. Unbiased signals are also available but come at a higher acquisition cost. The DM jointly optimizes both learning (information acquisition) and earning decisions to minimize expected loss. This problem is motivated by applications such as medical diagnostics and financial investments, where forecasting and decisions rely on multiple potentially biased information sources. We develop a Bayesian decision framework for a general class of such problems, modeling the multisource learning structure with a hierarchical Bayesian network. We fully solve the model and explicitly characterize the optimal acquisition policy, which diversifies across biased information sources to mitigate the risks associated with bias. We also illustrate the model using disease forecasting and intervention datasets.

Keywords: Multi-source learning, Bayesian network, optimal control, bias and misinformation, diversification strategy, forecasting aggregation

Suggested Citation

Keppo, Jussi and Kim, Michael Jong and Zhang, Xinyuan, Diversified Learning: Bayesian Control with Multiple Biased Information Sources (October 23, 2024). Available at SSRN: https://ssrn.com/abstract=4997308 or http://dx.doi.org/10.2139/ssrn.4997308

Jussi Keppo

National University of Singapore (NUS) - NUS Business School ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://https://www.jussikeppo.com

Michael Jong Kim

Sauder School of Business, University of British Columbia ( email )

Xinyuan Zhang (Contact Author)

Sauder School of Business, University of British Columbia ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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