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Subjective Dynamics Information Constraints

Author

Listed:
  • David Dillenberger

    (Department of Economics, University of Pennsylvania)

  • R. Vijay Krishna

    (Department of Economics, Florida State University)

  • Philipp Sadowski

    (Department of Economics, Duke University)

Abstract

We axiomatize a new class of recursive dynamic models that capture subjective constraints on the amount of information a decision maker can obtain, pay attention to, or absorb, via a Markov Decision Process for Information Choice (MIC). An MIC is a subjective decision process that specifies what type of information about the payoff-relevant state is feasible in the current period, and how the choice of what to learn now affects what can be learned in the future. The constraint imposed by the MIC is identified from choice behavior up to a recursive extension of Blackwell dominance. All the other parameters of the model, namely the anticipated evolution of the payoff-relevant state, state dependent consumption utilities, and the discount factor are also uniquely identified.

Suggested Citation

  • David Dillenberger & R. Vijay Krishna & Philipp Sadowski, 2016. "Subjective Dynamics Information Constraints," PIER Working Paper Archive 16-011, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2016.
    • Handle: RePEc:pen:papers:16-011
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    More about this item

    Keywords

    Dynamic Preferences; Recursive Information Constraints; Recursive Blackwell Dominance; Rational Inattention; Subjective Markov Decision Process; Familiarity Bias;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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