English, Article, Journal or magazine article edition: The (in)appropriate benchmark when beliefs are not the only state variable Godfrey Keller

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Bookmark: http://trove.nla.gov.au/version/21078
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The (in)appropriate benchmark when beliefs are not the only state variable
Author
  • Godfrey Keller
Physical Description
  • preprint
Notes
  • In models of learning by experimentation, there is a natural benchmark of myopia when the only intertemporal link is the agent`s subjective belief (signal independence). An alternative benchmark using a passive learner has been proposed when there is a further intertemporal link that directly affects payoffs (signal dependence). The purpose of this note is to suggest that the use of this particular benchmark is flawed for two reasons: first, passive learning does not disentangle the effects of knowing that beliefs might change as well as other state variables, and we offer another benchmark using a naive learner that does, and so necessarily reduces to myopia in the signal independent case; secondly, and maybe more tellingly, passive learning does not do what it is supposed to do, namely help measure the gains from active experimentation, since the payoffs of a passive learner can be markedly lower than those of a naive learner.
  • Experimentation, Learning
  • RePEc:oxf:wpaper:223
Language
  • English
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