Davide Bordoli

Non-Bayesian updating and value of information

Abstract: We study how non-Bayesian updating affects the evaluation of information, and when it may lead to information avoidance. We propose a measure of value based on anticipatory utility. Under this measure, information can have non-instrumental value. We show that the absence of non-instrumental value characterizes the optimality of perfect information, which in turn is equivalent to additional information being always desirable. We show that overreaction is incompatible with robust desirability of additional information, while underreaction may accommodate it.

Sophisticated reasoning, learning, and equilibrium in repeated games with imperfect feedback

with Pierpaolo Battigalli

Economic Theory, 2024

Abstract: We analyze the infinite repetition with imperfect feedback of a simultaneous or sequential game, assuming that players are strategically sophisticated—but impatient—expected-utility maximizers. Sophisticated strategic reasoning in the repeated game is combined with belief updating to provide a foundation for a refinement of self-confirming equilibrium. In particular, we model strategic sophistication as rationality and common strong belief in rationality. Then, we combine belief updating and sophisticated reasoning to provide sufficient conditions for a kind of learning—that is, the ability, in the limit, to exactly forecast the sequence of future observations—thus showing that impatient agents end up playing a sequence of self-confirming equilibria in strongly rationalizable conjectures of the one-period game.