Research
Research
Embedded Files
Before choosing her action to match the state of the world, an agent observes a stream of messages generated by some unknown binary signal. The agent can either learn the underlying signal for free and update her belief accordingly or ignore the observed message and keep her prior belief. After each period the stream stops with positive probability and the final choice is made.
We show that a Markovian agent with Gilboa-Schmeidler preferences learns and updates after confirming messages, but she ignores contradicting messages if her belief is suciently strong. Her threshold solely depends on the least precise signal.
The agent has strictly higher anticipatory utility than an agent who uses every message to update. However, the latter has a higher chance to choose the correct outcome in the end. In a population of strategic agents, who only differ in their initial beliefs, polarization is inevitable.
Our working paper is publicly available here. A more recent version can be found below.
Preker_Karos_Strategic_Information_Selection.pdfWe introduce a novel equilibrium concept that incorporates Knightian uncertainty into the cursed equilibrium (Eyster and Rabin, 2005). This concept is then applied to a two-player game in which agents can engage in trade or refuse to do so. While the Bayesian Nash equilibrium predicts that trade never happens, players do trade in a cursed equilibrium. The inclusion of uncertainty enhances this effect for cursed and uncertainty averse players. This contrasts general findings that uncertainty reduces trade but is consistent with behavior that has been observed in experiments.
The working paper is available on arXiv.
Page updated
Google Sites
Report abuse