A theory of subjective learning

Abstract

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. © 2014 Elsevier Inc