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Multi-state choices with aggregate feedback on unfamiliar alternatives

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  • Jehiel, Philippe
  • Singh, Juni
Abstract
This paper studies a multi-state binary choice experiment in which in each state, one alternative has well understood consequences whereas the other alternative has unknown consequences. Subjects repeatedly receive feedback from past choices about the consequences of unfamiliar alternatives but this feedback is aggregated over states. Varying the payoffs attached to the various alternatives in various states allows us to test whether unfamiliar alternatives are discounted and whether subjects' use of feedback is better explained by similarity-based reinforcement learning models (in the spirit of the valuation equilibrium, Jehiel and Samet, 2007) or by some variant of Bayesian learning model. Our experimental data suggest that there is no discount attached to the unfamiliar alternatives and that similarity-based reinforcement learning models have a better explanatory power than their Bayesian counterparts.

Suggested Citation

  • Jehiel, Philippe & Singh, Juni, 2021. "Multi-state choices with aggregate feedback on unfamiliar alternatives," Games and Economic Behavior, Elsevier, vol. 130(C), pages 1-24.
    • Handle: RePEc:eee:gamebe:v:130:y:2021:i:c:p:1-24
    DOI: 10.1016/j.geb.2021.07.007
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    More about this item

    Keywords

    Ambiguity; Bounded rationality; Experiment; Learning; Coarse feedback; Valuation equilibrium;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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