CUTTING-EDGE RESEARCH BY FACULTY OF IIM BANGALORE

Faculty members at IIM Bangalore generate knowledge through cutting-edge research in all functional areas of management that would benefit public and private sector companies, and government and society in general. The knowledge generated by IIMB faculty appears in leading academic journals with high citation index and impact factor. Many textbooks and working papers are written on a regular basis. Research carried out by IIMB is used to augment new courses and executive education programmes.

Journal of Economic Theory

Vol. 158, Part A, July 2015, pp. 232-258

Paper Title: Dynamic choice in a complex world

Abstract

We consider an environment in which a Decision Maker (DM) finds it sufficiently complex to even describe the state space, let alone guess the parameters of the underlying data generating process. He is therefore unable to use the standard Bayesian methods. Instead, at each moment in time, the DM constructs a preference relation on the set of available actions based on their past performance. We postulate a set of axioms on this family of preference relations indexed by histories (of rewards). Two key conditions, a typical dium; Exchangeability axiom and another labeled Consistency, that constraints the DM not to update her preferences after certain events (loosely based the “the principle of insufficient reason”), characterize thumb rules for ranking actions that are akin to the familiar fictitious play in game theory. Moreover, if in fact the stochastic process that generates the rewards is exchangeable, a DM that obeys our axioms (almost surely) cannot be distinguished in the long run from one that is fully cognizant of the environment and satisfies the expected utility hypothesis. The main result requires proving a representation result on multisets which may be of independent interest.

Journal of Economic Theory

Journal of Economic TheoryQR

Written by,

Murali Agastya, Indian Institute of Management Bangalore.

Read More @ Journal of Economic Theory

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