Skip to main content Skip to navigation

Estimating Bayesian Decision Problems with Heterogenous Priors

Estimating Bayesian Decision Problems with Heterogenous Priors

127/2013 Stephen Hansen and Michael McMahon
culture and development, working papers
Journal of Applied Econometrics
https://doi.org/10.1002/jae.2446

127/2013 Stephen Hansen and Michael McMahon

In many areas of economics there is a growing interest in how expertise and preferences drive individual and group decision making under uncertainty. Increasingly, we wish to estimate such models to quantify which of these drive decision making. In this paper we propose a new channel through which we can empirically identify expertise and preference parameters by using variation in decisions over 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 those environments which can be estimated using existing methods.

Culture and Development

Journal of Applied Econometrics

https://doi.org/10.1002/jae.2446