Bounded memory and biases in information processing

• Autores: Andrea Wilson
• Localización: Econométrica: Journal of the Econometric Society, ISSN 0012-9682, Vol. 82, Nº 6, 2014, págs. 2257-2294
• Idioma: inglés
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• Resumen

  • Before choosing among two actions with state-dependent payoffs, a Bayesian decision-maker with a finite memory sees a sequence of informative signals, ending each period with fixed chance. He summarizes information observed with a finite-state automaton.

    I characterize the optimal protocol as an equilibrium of a dynamic game of imperfect recall; a new player runs each memory state each period. Players act as if maximizing expected payoffs in a common finite action decision problem. I characterize equilibrium play with many multinomial signals. The optimal protocol rationalizes many behavioral phenomena, like �stickiness,� salience, confirmation bias, and belief polarization.