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Selective sampling with information-storage constraints


Jehiel, Philippe; Steiner, Jakub (2020). Selective sampling with information-storage constraints. Economic Journal, 130(630):1753-1781.

Abstract

A memoryless agent can acquire arbitrarily many signals. After each signal observation, she either terminates and chooses an action, or she discards her observation and draws a new signal. By conditioning the probability of termination on the information collected, she controls the correlation between the payoff state and her terminal action. We provide an optimality condition for the emerging stochastic choice. The condition highlights the benefits of selective memory applied to the extracted signals. Implications—obtained in simple examples—include (i) confirmation bias, (ii) speed-accuracy complementarity, (iii) overweighting of rare events, and (iv) salience effect.

Abstract

A memoryless agent can acquire arbitrarily many signals. After each signal observation, she either terminates and chooses an action, or she discards her observation and draws a new signal. By conditioning the probability of termination on the information collected, she controls the correlation between the payoff state and her terminal action. We provide an optimality condition for the emerging stochastic choice. The condition highlights the benefits of selective memory applied to the extracted signals. Implications—obtained in simple examples—include (i) confirmation bias, (ii) speed-accuracy complementarity, (iii) overweighting of rare events, and (iv) salience effect.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Economics and Econometrics
Language:English
Date:1 August 2020
Deposited On:14 Jan 2020 12:34
Last Modified:21 Aug 2020 01:03
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0013-0133
Additional Information:This is the peer reviewed version of the following article: "Jehiel, Philippe; Steiner, Jakub (2019). Selective sampling with information-storage constraints. Economic Journal, uez068", which has been published in final form at https://doi.org/10.1093/ej/uez068. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. (http://www.wileyauthors.com/self-archiving)
OA Status:Hybrid
Publisher DOI:https://doi.org/10.1093/ej/uez068

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