Optimal growth and uncertainty: Learning

Abstract

We introduce learning in a Brock-Mirman environment and study the effect of risk generated by the planner's econometric activity on optimal consumption and investment. Here, learning introduces two sources of risk about future payoffs: structural uncertainty and uncertainty from the anticipation of learning. The latter renders control and learning nonseparable.We present two sets of results in a learning environment. First, conditions under which the introduction of learning increases or decreases optimal consumption are provided. The effect depends on the strengths and directions of the two sources of risk, which may pull in opposite directions. Second, the effects of changes in the mean and riskiness of the distribution of the signal and initial beliefs on optimal consumption are studied.

Information in Cournot: Signaling with incomplete control

“…How the presence of different sources of information (e.g., price and experience) affects the behavior of the firms is a question left for future research. Indeed, combining experimentation (Grossman et al, 1977;Aghion et al, 1991;Fusselman and Mirman, 1993) or passive learning (Koulovatianos et al, 2009) with signaling could further our understanding on how different types of learning affect the information role of price.…”

Strategic Exploitation of a Common-Property Resource Under Rational Learning About its Reproduction

“…8 We obtain a unique and robust equilibrium in pure Markov-perfect strategies under truthful revelation of beliefs among all players. We show that if the priors of at least one player about the renewal prospects of the resource are exogenously shifted to being more 5 Our setup of Bayesian learners who anticipate learning in the future is similar to the case of rational learning examined by Guidolin and Timmermann (2007), Cogley and Sargent (2008), and Koulovatianos, Mirman, and Santugini (2009). 6 Focusing on Markov-perfect-Nash-equilibrium strategies may seem restrictive.…”

“…The …rst is the Levhari and Mirman (1980) example about strategic exploitation of renewable resources. The second is the framework by Koulovatianos, Mirman, and Santugini (2009) which combines dynamic programming with rational learning and provides analytical solutions. Similarly to the latter study, the stochastic structure of our model is general, i.e., our results do not depend on any speci…c assumptions about the densities of any random variables in our model.…”

“…In their survey paper, Blume and Easley (1993) explain this distinction as well. 8 A recent paper that also combines strategic interaction extending the Levhari and Mirman (1980) model with rational Bayesian learning in a similar fashion to Koulovatianos, Mirman, and Santugini (2009) is Mirman and Santugini (2013). A key di¤erence of the present paper from Mirman and Santugini (2013) is that here heterogeneous beliefs are allowed and the impact of belief changes of one player can be characterized using a general stochastic structure for learning.…”

Increasing Taxes After a Financial Crisis: Not a Bad Idea After All...

“…For a distinction between rational learning and adaptive learning see, for example,Koulovatianos, Mirman, and Santugini (2009), andKoulovatianos and Wieland (2011).…”