Optimal Dynamic Information Acquisition

Zhong, Weijie

doi:10.2139/ssrn.3024275

Cited by 35 publications

(41 citation statements)

References 18 publications

(12 reference statements)

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Section: Introductionmentioning

confidence: 99%

“…Note that the curvature of the utility function over prizes plays no role in this comparison. This aspect of the standard model has important implications, with many papers relying crucially and explicitly on it (e.g., Ely and Szydlowski (2020), Zhong (2019)). 2 As the standard model makes such sharp predictions, we start our investigation by testing them in incentivized experiments.…”

Section: Introductionmentioning

confidence: 99%

“… For example, Zhong () studies dynamic models of information acquisition and shows that the optimal strategy uses Poisson signals. The reason is that the decision time with Poisson signals is a mean‐preserving spread of the decision time in any other strategy, and is thus preferred under EDU due to RSTL. …”

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confidence: 99%

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Time Lotteries and Stochastic Impatience

DeJarnette

Dillenberger

Gottlieb

et al. 2020

ECTA

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We study preferences over lotteries in which both the prize and the payment date are uncertain. In particular, a time lottery is one in which the prize is fixed but the date is random. With Expected Discounted Utility, individuals must be risk seeking over time lotteries (RSTL). In an incentivized experiment, however, we find that almost all subjects violate this property. Our main contributions are theoretical. We first show that within a very broad class of models, which includes many forms of nonexpected utility and time discounting, it is impossible to accommodate even a single violation of RSTL without also violating a property we termed Stochastic Impatience, a risky counterpart of standard Impatience. We then present two positive results. If one wishes to maintain Stochastic Impatience, violations of RSTL can be accommodated by keeping Independence within periods while relaxing it across periods. If, instead, one is willing to forego Stochastic Impatience, violations of RSTL can be accommodated with a simple generalization of Expected Discounted Utility, obtained by imposing only the behavioral postulates of Discounted Utility and Expected Utility.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Time Lotteries and Stochastic Impatience

DeJarnette

Dillenberger

Gottlieb

et al. 2020

ECTA

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“…At this point, we have also not shown that V (q) is differentiable everywhere, but this is proven in the proof of Theorem 1.11Che and Mierendorff (2016) andZhong (2017) explore related models with jumps in beliefs. These are assumed to represent the only possible form of information arrival in the former paper, and demonstrated to represent an optimal form of experimentation in the latter paper, under assumptions different from those made here.…”

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confidence: 91%

“…It is the assumption that the flow cost function in our dynamic evidence accumulation problem satisfies Condition 6 that allows us to avoid considering the possibility of Poisson jumps in the posterior belief state of the kind assumed byChe and Mierendorff (2016) andZhong (2017) in the continuous-time model presented in section 2 Zhong (2017). presents conditions under which information accumulation with Poisson jumps can be optimal, but considers only posterior-separable flow cost functions of the form (12) based on a Bregman divergence, so that (18) holds with equality rather than an inequality.…”

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confidence: 99%

Rational Inattention and Sequential Information Sampling

Hébert¹,

Woodford²

2017

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We propose a new principle for measuring the cost of information structures in rational inattention problems, based on the cost of generating the information used to make a decision through a dynamic evidence accumulation process. We introduce a continuous-time model of sequential information sampling, and show that, in a broad class of cases, the choice frequencies resulting from optimal information accumulation are the same as those implied by a static rational inattention problem with a particular static information-cost function. Among the static cost functions that can be justified in this way is the mutual information cost function proposed by Sims (2010), but we show that other cost functions can be micro-founded in this way as well. In particular, we introduce a class of "neighborhood-based" cost functions, which make it more costly to undertake experiments that can produce different results in similar states, and show that the predictions of this alternative rational inattention theory better conform with evidence from perceptual discrimination experiments.

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