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- Title
Experimentation with heteroskedastic noise.
- Authors
Creane, Anthony
- Abstract
The article comments on heteroskedastic noise. For a firm with unknown demand, information can be thought of as a sometimes inadvertent good among the goods it produces. A firm can often gather more information by varying from its best decision from time to time or experimenting. Many models have examined how incomplete information regarding unknown parameters can affect the behavior of producers. The author finds that the ability to create information depends on what is uncertain and how the noise is modeled and that adding noise can cause information to increase in the choice variable where previously it had decreased. Thus, previous results can be reversed by changing how incomplete information is modeled without changing what the agent does not know. That is, many of the results in previous models do not arise from the uncertainty regarding some function, per se, but rather how incomplete information is modeled. Previous works have also derived conditions of learning, but with homoskedastic noise. However, models with heteroskedastic noise are more natural. Uncertainty regarding income, taste, population, etc.
- Subjects
UNITED States; ECONOMETRIC models; NOISE; POPULATION; BEHAVIOR; INCOME; MATHEMATICAL variables; MATHEMATICAL functions
- Publication
Economic Theory, 1994, Vol 4, Issue 2, p275
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/BF01221204