The (in)appropriate benchmark when beliefs are not the only state variable.
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 affect...
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| Formáid: | Working paper |
| Teanga: | English |
| Foilsithe / Cruthaithe: |
Department of Economics (University of Oxford)
2005
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| _version_ | 1826280732433055744 |
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| author | Keller, G |
| author_facet | Keller, G |
| author_sort | Keller, G |
| collection | OXFORD |
| description | 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 na¨ıve 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 na¨ıve learner. |
| first_indexed | 2024-03-07T00:18:07Z |
| format | Working paper |
| id | oxford-uuid:7b8df33c-e6ec-4607-8756-d049d9d7bcee |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T00:18:07Z |
| publishDate | 2005 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:7b8df33c-e6ec-4607-8756-d049d9d7bcee2022-03-26T20:51:25ZThe (in)appropriate benchmark when beliefs are not the only state variable.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:7b8df33c-e6ec-4607-8756-d049d9d7bceeEnglishOxford University Research Archive - ValetDepartment of Economics (University of Oxford)2005Keller, GIn 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 na¨ıve 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 na¨ıve learner. |
| spellingShingle | Keller, G The (in)appropriate benchmark when beliefs are not the only state variable. |
| title | The (in)appropriate benchmark when beliefs are not the only state variable. |
| title_full | The (in)appropriate benchmark when beliefs are not the only state variable. |
| title_fullStr | The (in)appropriate benchmark when beliefs are not the only state variable. |
| title_full_unstemmed | The (in)appropriate benchmark when beliefs are not the only state variable. |
| title_short | The (in)appropriate benchmark when beliefs are not the only state variable. |
| title_sort | in appropriate benchmark when beliefs are not the only state variable |
| work_keys_str_mv | AT kellerg theinappropriatebenchmarkwhenbeliefsarenottheonlystatevariable AT kellerg inappropriatebenchmarkwhenbeliefsarenottheonlystatevariable |