Optimal learning under robustness and time-consistency

DOI10.1287/OPRE.2019.1899MaRDI QIDQ5095142zbMATHOpenAlexFDO

Authors Larry G. Epstein, Shaolin Ji

Publication date 5 August 2022

Published in Operations Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1708.01890

zbMATH Keywords

learningmodel uncertaintyambiguityoptimal stoppingpartial informationrecursive utilitytime-consistencyEllsberg paradoxrobust decisionssequential testing of simple hypotheses

Mathematics Subject Classification ID

Decision theory (91B06)

Abstract: We model learning in a continuous-time Brownian setting where there is prior ambiguity. The associated model of preference values robustness and is time-consistent. It is applied to study optimal learning when the choice between actions can be postponed, at a per-unit-time cost, in order to observe a signal that provides information about an unknown parameter. The corresponding optimal stopping problem is solved in closed-form, with a focus on two specific settings: Ellsberg's two-urn thought experiment expanded to allow learning before the choice of bets, and a robust version of the classical problem of sequential testing of two simple hypotheses about the unknown drift of a Wiener process. In both cases, the link between robustness and the demand for learning is studied.

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Cited in

(5)

• On ε-Optimality of the Pursuit Learning Algorithm
• Optimal and robust memoryless discrimination from dependent observations
• Robust experimentation in the continuous time bandit problem
• Robustness and ambiguity in continuous time
• Robust Partial-Learning in Linear Gaussian Systems

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