We study the properties of generalized stochastic gradient (GSG) learning in forward-looking models. We examine how the conditions for stability of standard stochastic gradient (SG) learning both differ from and are related to E-stability, which governs stability under least squares learning. SG...

We propose a model of instrumental belief choice under loss aversion. When new information arrives, an agent is prompted to abandon her prior. However, potential posteriors may induce her to take actions that generate a lower utility in some states than actions induced by her prior. These losses...

The ability to uncover preferences from choices is fundamental for both positive economics and welfare analysis. Overwhelming evidence shows that choice is stochastic, which has given rise to random utility models as the dominant paradigm in applied microeconomics. However, as is well known, it...

We analyse firms' sourcing decisions under institutional uncertainty in foreign countries. Firms can reduce their uncertainty by observing offshoring firms' behaviour. The model characterises a sequential offshoring equilibrium path, led by the most productive firms in the market. With multiple...

In the seminal rational inattention model of Matĕjka and McKay (2015), logit demand arises from the discrete choice of agents who are uncertain about choice payoffs and who have access to a flexible, costly information acquisition technology (RI-logit). A notable limitation of this powerful...

We report the results of an experiment on selective exposure to information. A decision maker interested in learning about an uncertain state of the world can acquire information from one of two sources which have opposite biases: when informed on the state, they report it truthfully; when...

This paper investigates ambiguity attitudes for natural events (temperatures) and how they are updated following new information. Using a general population sample, we first obtain baseline ambiguity attitudes for future weather events based on real temperatures over several past days. Second,...

This study measures the differences in ambiguity attitudes of groups and individuals in the gain and loss domain. We elicit the ambiguity attitudes and ambiguity-generated insensitivity for natural temperature events. We do not find significant differences between individuals and groups in our...

We study the influence of reason and intuition on decision making over time. Facing a sequence of similar problems, agents can either decide rationally according to expected utility theory or intuitively according to case-based decision theory. Rational decisions are more precise but create...

The literature on learning in unknown environments emphasises reinforcing on actions which produce positive results. But, in some cases, success requires shifting from a currently successful actions to others. We examine, experimentally and theoretically in a very simple framework, how...