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Estimating Bayesian decision problems with heterogeneous priors
Hansen, Stephen Eliot; McMahon, Michael
Universitat Pompeu Fabra. Departament d'Economia i Empresa
In many areas of economics there is a growing interest in how expertise andpreferences drive individual and group decision making under uncertainty. Increasingly, we wish to estimate such models to quantify which of these drive decisionmaking. In this paper we propose a new channel through which we can empirically identify expertise and preference parameters by using variation in decisionsover heterogeneous priors. Relative to existing estimation approaches, our \Prior-Based Identification" extends the possible environments which can be estimated,and also substantially improves the accuracy and precision of estimates in thoseenvironments which can be estimated using existing methods.
Business Economics and Industrial Organization
bayesian decision making; expertise; preferences; estimation.
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