Asymptotic behavior of Bayesian learners with misspecified models

A-Tier
Journal: Journal of Economic Theory
Year: 2021
Volume: 195
Issue: C

Authors (3)

Esponda, Ignacio (Washington University in St. L...) Pouzo, Demian (not in RePEc) Yamamoto, Yuichi (not in RePEc)

Score contribution per author:

1.341 = (α=2.01 / 3 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We consider an agent who represents uncertainty about the environment via a possibly misspecified model. Each period, the agent takes an action, observes a consequence, and uses Bayes' rule to update her belief about the environment. This framework has become increasingly popular in economics to study behavior driven by incorrect or biased beliefs. By first showing that the key element to predict the agent's behavior is the frequency of her past actions, we are able to characterize asymptotic behavior in general settings in terms of the solutions of a differential inclusion that describes the evolution of the frequency of actions. We then present a series of implications that can be readily applied to economic applications, thus providing off-the-shelf tools that can be used to characterize behavior under misspecified learning.

Technical Details

RePEc Handle
repec:eee:jetheo:v:195:y:2021:i:c:s0022053121000776
Journal Field
Theory
Author Count
3
Added to Database
2026-01-25