On the convergence of Bayesian posterior processes in linear economic models Counting equations and unknowns

Research output: Contribution to journalArticle

Abstract

I propose a technique, counting 'equations' and 'unknowns', for determining when the posterior distributions of the parameters of a linear regression process converge to their true values. This is applied to examples and to the infinite-horizon optimal control of this linear regression process with learning, and in particular to the problem of a monopolist seeking to maximize profits with unknown demand curve. Such a monopolist has a tradeoff between choosing an action to maximize the current-period reward and to maximize the information value of that action. I use the above technique to determine the monopolist's limiting behavior and to determine whether in the limit it learns the true parameter values of the demand curve.

Original languageEnglish (US)
Pages (from-to)687-713
Number of pages27
JournalJournal of Economic Dynamics and Control
Volume15
Issue number4
DOIs
StatePublished - 1991

Fingerprint

Economic Model
Linear regression
Counting
Linear Model
Maximise
Unknown
Economics
Value of Information
Profitability
Curve
Limiting Behavior
Infinite Horizon
Posterior distribution
Reward
Profit
Optimal Control
Trade-offs
Converge
Monopolist
Demand

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization

Cite this

@article{bb209876efc4440795ce6377ec98babf,
title = "On the convergence of Bayesian posterior processes in linear economic models Counting equations and unknowns",
abstract = "I propose a technique, counting 'equations' and 'unknowns', for determining when the posterior distributions of the parameters of a linear regression process converge to their true values. This is applied to examples and to the infinite-horizon optimal control of this linear regression process with learning, and in particular to the problem of a monopolist seeking to maximize profits with unknown demand curve. Such a monopolist has a tradeoff between choosing an action to maximize the current-period reward and to maximize the information value of that action. I use the above technique to determine the monopolist's limiting behavior and to determine whether in the limit it learns the true parameter values of the demand curve.",
author = "Yaw Nyarko",
year = "1991",
doi = "10.1016/0165-1889(91)90039-4",
language = "English (US)",
volume = "15",
pages = "687--713",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier",
number = "4",

}

TY - JOUR

T1 - On the convergence of Bayesian posterior processes in linear economic models Counting equations and unknowns

AU - Nyarko, Yaw

PY - 1991

Y1 - 1991

N2 - I propose a technique, counting 'equations' and 'unknowns', for determining when the posterior distributions of the parameters of a linear regression process converge to their true values. This is applied to examples and to the infinite-horizon optimal control of this linear regression process with learning, and in particular to the problem of a monopolist seeking to maximize profits with unknown demand curve. Such a monopolist has a tradeoff between choosing an action to maximize the current-period reward and to maximize the information value of that action. I use the above technique to determine the monopolist's limiting behavior and to determine whether in the limit it learns the true parameter values of the demand curve.

AB - I propose a technique, counting 'equations' and 'unknowns', for determining when the posterior distributions of the parameters of a linear regression process converge to their true values. This is applied to examples and to the infinite-horizon optimal control of this linear regression process with learning, and in particular to the problem of a monopolist seeking to maximize profits with unknown demand curve. Such a monopolist has a tradeoff between choosing an action to maximize the current-period reward and to maximize the information value of that action. I use the above technique to determine the monopolist's limiting behavior and to determine whether in the limit it learns the true parameter values of the demand curve.

UR - http://www.scopus.com/inward/record.url?scp=0000823517&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0000823517&partnerID=8YFLogxK

U2 - 10.1016/0165-1889(91)90039-4

DO - 10.1016/0165-1889(91)90039-4

M3 - Article

VL - 15

SP - 687

EP - 713

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

IS - 4

ER -