Template-Type: ReDIF-Paper 1.0
Title: Prolonged Learning and Hasty Stopping: The Wald Problem With Ambiguity
Author-Name: Sarah Auster
Author-Email: auster.sarah@gmail.com
Author-Name: Yeon-Koo Che
Author-Email: yeonkooche@gmail.com
Author-Name: Konrad Mierendorff
Classification-JEL: C61, D81, D83, D91
Keywords: Wald Problem, Ambiguity Aversion


Abstract: This paper studies sequential information acquisition by an ambiguity-averse decision
maker (DM), who decides how long to collect information before taking an irreversible
action. The agent optimizes against the worst-case belief and updates prior by prior.
We show that the consideration of ambiguity gives rise to rich dynamics: compared to
the Bayesian DM, the DM here tends to experiment excessively when facing modest uncertainty
and, to counteract it, may stop experimenting prematurely when facing high
uncertainty. In the latter case, the DM’s stopping rule is non-monotonic in beliefs and
features randomized stopping.


Note: 
Length: 51
Creation-Date: 2022-09
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp366
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2022_366