Abstract:We examine the long-term behavior of a Bayesian agent who has a misspecified belief about the time lag between actions and feedback, and learns about the payoff consequences of his actions over time. Misspecified beliefs about time lags result in attribution errors, which have no long-term effect when the agent's action converges, but can lead to arbitrarily large long-term inefficiencies when his action cycles. Our proof uses concentration inequalities to bound the frequency of action switches, which are usef… Show more
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