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Learning with Heterogeneous Misspecfied Models: Characterization and Robustness

Author

Listed:
  • J. Aislinn Bohren

    (University of Pennsylvania)

  • Daniel N. Hauser

    (Aalto University and Helsinki GSE)

Abstract

This paper develops a general framework to study how misinterpreting information impacts learning. Our main result is a simple criterion to characterize long-run beliefs based on the underlying form of misspeci?cation. We present this characterization in the context of social learning, then highlight how it applies to other learning environ-ments, including individual learning. A key contribution is that our characterization applies to settings with model heterogeneity and provides conditions for entrenched disagreement. Our characterization can be used to determine whether a representative agent approach is valid in the face of heterogeneity, study how di?ering levels of bias or unawareness of others’ biases impact learning, and explore whether the impact of a bias is sensitive to parametric speci?cation or the source of information. This uni?ed framework synthesizes insights gleaned from previously studied forms of misspeci?ca-tion and provides novel insights in speci?c applications, as we demonstrate in settings with partisan bias, overreaction, naive learning, and level-k reasoning.

Suggested Citation

  • J. Aislinn Bohren & Daniel N. Hauser, 2021. "Learning with Heterogeneous Misspecfied Models: Characterization and Robustness," PIER Working Paper Archive 21-005, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:21-005
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    References listed on IDEAS

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    More about this item

    Keywords

    Model misspecication; Social learning;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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