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Selective Sampling with Information-Storage Constraints

Jehiel, P; Steiner, J; (2019) Selective Sampling with Information-Storage Constraints. The Economic Journal 10.1093/ej/uez068. (In press). Green open access

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Abstract

A memoryless agent can acquire arbitrarily many signals. After each signal observation, she either terminates and chooses an action, or she discards her observation and draws a new signal. By conditioning the probability of termination on the information collected, she controls the correlation between the payoff state and her terminal action. We provide an optimality condition for the emerging stochastic choice. The condition highlights the benefits of selective memory applied to the extracted signals. Implications—obtained in simple examples—include (i) confirmation bias, (ii) speed-accuracy complementarity, (iii) overweighting of rare events, and (iv) salience effect.

Type: Article
Title: Selective Sampling with Information-Storage Constraints
Open access status: An open access version is available from UCL Discovery
DOI: 10.1093/ej/uez068
Publisher version: https://doi.org/10.1093/ej/uez068
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10104608
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