A policy maker knows two models. One implies an exploitable inflation-unemployment trade-off, the other does not. The policy maker's prior probability over the two models is part of his state vector. Bayes' law converts the prior probability into a posterior probability and gives the policy...

We study how a concern for robustness modifies a policymaker's incentive to experiment. A policymaker has a prior over two submodels of inflation-unemployment dynamics. One submodel implies an exploitable trade-off, the other does not. Bayes' law gives the policymaker an incentive to experiment....