Publications of Philipp Sadowski
%% Journal Articles
@article{fds371111,
Author = {Dillenberger, D and Krishna, RV and Sadowski, P},
Title = {Subjective information choice processes},
Journal = {Theoretical Economics},
Volume = {18},
Number = {2},
Pages = {529-559},
Year = {2023},
Month = {May},
Abstract = {We propose a class of dynamic models that capture subjective
(and, hence, unobservable) constraints on the amount of
information a decision maker can acquire, pay attention to,
or absorb via an information choice process (ICP). An ICP
specifies the information that can be acquired about the
payoff-relevant state in the current period and how this
choice affects what can be learned in the future. In spite
of their generality, wherein ICPs can accommodate any
dependence of the information constraint on the history of
information choices and state realizations, we show that the
constraints imposed by them are identified up to a dynamic
extension of Blackwell dominance. All the other parameters
of the model are also uniquely identified.},
Doi = {10.3982/TE4531},
Key = {fds371111}
}
@article{fds340875,
Author = {Dillenberger, D and Sadowski, P},
Title = {Stable behavior and generalized partition},
Journal = {Economic Theory},
Volume = {68},
Number = {2},
Pages = {285-302},
Year = {2019},
Month = {September},
Abstract = {Behavior is stable if the ex ante ranking of two acts that
differ only on some event I coincides with their ex post
ranking upon learning I. We identify the largest class of
information structures for which the behavior of a Bayesian
expected utility maximizer is stable. We call them
generalized partitions and characterize the learning
processes they can accommodate. Often, the information
structure is not explicitly part of the primitives in the
model, and so becomes a subjective parameter. We propose a
way to identify how the individual plans to choose
contingent on learning an event, and establish that for a
Bayesian expected utility maximizer, stable
behavior—formulated in terms of this indirectly observed
contingent ranking—is a tight characterization of
subjective learning via a generalized partition.},
Doi = {10.1007/s00199-018-1122-z},
Key = {fds340875}
}
@article{fds326599,
Author = {Daley, B and Sadowski, P},
Title = {Magical thinking: A representation result},
Journal = {Theoretical Economics},
Volume = {12},
Number = {2},
Pages = {909-956},
Publisher = {The Econometric Society},
Year = {2017},
Month = {May},
Abstract = {This paper suggests a novel way to import the approach of
axiomatic theories of individual choice into strategic
settings and demonstrates the benefits of this approach. We
propose both a tractable behavioral model as well as axioms
applied to the behavior of the collection of players,
focusing first on prisoners' dilemma games. A representation
theorem establishes these axioms as the precise behavioral
content of the model, and that the model's parameters are
(essentially) uniquely identified from behavior. The
behavioral model features magical thinking: players behave
as if their expectations about their opponents' behavior
vary with their own choices. The model provides a unified
view of documented behavior in a range of often studied
games, such as the prisoners' dilemma, the battle of the
sexes, hawk–dove, and the stag hunt, and also generates
novel predictions across games.},
Doi = {10.3982/TE2099},
Key = {fds326599}
}
@article{fds318182,
Author = {Sadowski, P},
Title = {Overeagerness},
Journal = {Journal of Economic Behavior and Organization},
Volume = {131},
Pages = {114-125},
Publisher = {Elsevier BV},
Year = {2016},
Month = {November},
Abstract = {We capture the impression that high types may send lower
signals than low types in order not to appear too desperate.
We require a noisy one-dimensional signal, where a very low
signal being transmitted forces types to execute their
outside option. The central assumption is that low types are
not only less productive when employed, but that they also
face a worse outside option. High types then exploit low
types’ eagerness not to end up with their bad outside
option by running a larger risk of transmitting a very low
signal.},
Doi = {10.1016/j.jebo.2016.08.014},
Key = {fds318182}
}
@article{fds320615,
Author = {Krishna, R and Sadowski, P},
Title = {Randomly Evolving Tastes and Delayed Commitment},
Journal = {Economic Research Initiatives at Duke (ERID)},
Volume = {92},
Number = {218},
Pages = {39 pages},
Year = {2016},
Month = {June},
Abstract = {We consider a decision maker with randomly evolving tastes
who faces dynamic decision situations that involve
intertemporal tradeoffs, such as those in consumption
savings problems. We axiomatize a recursive representation
of choice that features uncertain consumption utilities,
which evolve according to a subjective Markov process. The
parameters of the representation, which are the subjective
Markov process governing the evolution of utilities, and the
discount factor, are uniquely identified from behavior. We
relate the correlation of tastes over time and the desire to
delay commitment to future consumption.},
Doi = {10.1016/j.jmateco.2020.09.007},
Key = {fds320615}
}
@article{fds320616,
Author = {Sadowski, P},
Title = {Preferences with Taste Shock Representations: Price
Volatility and the Liquidity Premium},
Journal = {Economic Research Initiatives at Duke (ERID)},
Volume = {101},
Number = {219},
Pages = {13 pages},
Year = {2016},
Month = {June},
Abstract = {If price volatility is caused in some part by taste shocks,
then it should be positively correlated with the liquidity
premium. Our argument is based on Krishna and Sadowski
(2014), who provide foundations for a representation of
dynamic choice with taste shocks, and show that volatility
in tastes corresponds to a desire to maintain flexibility.
To formally connect volatile tastes to price volatility and
preference for flexibility to the liquidity premium, we
analyze a modified simple Lucas tree economy, where the
representative agent is uncertain about his degree of future
risk aversion, and where the productive asset cannot be
traded in every period, while rights to output can. We show
that a representative agent with a higher degree of
uncertainty about his future risk aversion implies a higher
liquidity premium (i.e., a lower price for the illiquid
asset) and more price volatility.},
Doi = {10.1016/j.mathsocsci.2019.06.004},
Key = {fds320616}
}
@article{fds320617,
Author = {Dillenberger, D and Sadowski, P},
Title = {Inertial Behavior and Generalized Partition},
Journal = {Economic Research Initiatives at Duke (ERID)},
Number = {216},
Pages = {26 pages},
Year = {2016},
Month = {May},
Abstract = {We call behavior inertial if it does not react to the
apparent arrival of relevant information. In a context where
the precise information content of signals is subjective, we
formulate an axiom that captures inertial behavior, and
provide a representation that explains such behavior as that
of a rational decision maker who perceives a particular type
of information structure, which we call a generalized
partition. We characterize the learning processes that can
be described by a generalized partition. We proceed to
assume that there is a true underlying information structure
that may not be a generalized partition, and investigate
different channels that may lead the decision maker to
nonetheless perceive a generalized partition (and thus to
display inertial behavior): A cognitive bias referred to as
cognitive inertia and a bound on rationality which we term
shortsightedness.},
Key = {fds320617}
}
@article{fds320618,
Author = {Dillenberger, D and Krishna, R and Sadowski, P},
Title = {Subjective Dynamic Information Constraints},
Journal = {Economic Research Initiatives at Duke (ERID)},
Number = {214},
Pages = {58 pages},
Year = {2016},
Month = {April},
Abstract = {We axiomatize a new class of recursive dynamic models that
capture subjective constraints on the amount of information
a decision maker can obtain, pay attention to, or absorb,
via a Markov Decision Process for Information Choice (MIC).
An MIC is a subjective decision process that specifies what
type of information about the payoff-relevant state is
feasible in the current period, and how the choice of what
to learn now affects what can be learned in the future. The
constraint imposed by the MIC is identified from choice
behavior up to a recursive extension of Blackwell dominance.
All the other parameters of the model, namely the
anticipated evolution of the payoff-relevant state, state
dependent consumption utilities, and the discount factor are
also uniquely identified.},
Key = {fds320618}
}
@article{fds320619,
Author = {Dillenberger, D and Krishna, R and Sadowski, P},
Title = {Supplement to 'Subjective Dynamic Information
Constraints'},
Journal = {Economic Research Initiatives at Duke (ERID)},
Number = {215},
Pages = {34 pages},
Year = {2016},
Month = {April},
Abstract = {Supplement to "Subjective Dynamic Information Constraints"
(http://ssrn.com/abstract=2774300). All references to
definitions and results in this Supplement refer to
Dillenberger, Krishna, and Sadowski (2016, henceforth DKS)
unless otherwise specified. This supplement is organized as
follows. Section 1 establishes the Abstract Static
Representation that is the starting point for our
derivations in Appendix C of DKS. Section 2 reviews relevant
notions from convex analysis. Section 3 provides a
preference independent notion of minimality on the space of
rics, which is referred to in Section 6 of DKS. Section 4
provides a metric on the space of partitions as referred to
in Appendix A.3 of DKS. Section 5 extends the existence of
the RAA representation, which is established in Krishna and
Sadowski (2014) for finite prize spaces, to our domain with
a compact set of prizes, as discussed in Appendix A.7 of
DKS. Finally, Section 6 provides a detailed proof of the
partitional representation introduced in Appendix C.1 of
DKS.},
Key = {fds320619}
}
@article{fds320620,
Author = {Conrad, RF and Hool, B and Nekipelov, D},
Title = {The Role of Royalties in Resource Extraction
Contracts},
Journal = {Economic Research Initiatives at Duke (ERID) Working
Paper},
Volume = {94},
Number = {195},
Pages = {340-353},
Publisher = {University of Wisconsin Press},
Year = {2015},
Month = {September},
Abstract = {The manner in which governments charge mineral resource
producers has been the subject of considerable debate. In
particular, there is a continuing debate about whether
royalties should be reduced or eliminated, the preferred
alternative then being some variant of an income-based
charge such as a resource rent tax, a policy adopted in
Norway, the United Kingdom and Australia. The argument for
avoiding royalties is based on analyses demonstrating that
royalties and other quantity-based charges distort
production decisions and lead to outcomes such as
high-grading and premature mine closure. We argue that it is
inappropriate to infer that royalties are inefficient from
the perspective of the resource owner (typically a
government on behalf of society). Rather, the royalty serves
a key pricing purpose and should be interpreted as the
capital loss on the resource owner's balance sheet from
extracting marginal reserves. We demonstrate this result
under various conditions of uncertainty and informational
asymmetry, using an incentive-based framework which enables
us to highlight the separation of asset ownership from asset
use. The principal-agent framework is consistent with the
contracting problem encountered by governments who as
resource owners contract with private sector firms for
extraction rights.},
Doi = {10.3368/le.94.3.340},
Key = {fds320620}
}
@article{fds285778,
Author = {Dillenberger, D and Lleras, JS and Sadowski, P and Takeoka,
N},
Title = {A theory of subjective learning},
Journal = {Journal of Economic Theory},
Volume = {153},
Number = {1},
Pages = {287-312},
Publisher = {Elsevier BV},
Year = {2014},
Month = {January},
ISSN = {0022-0531},
Abstract = {We study an individual who faces a dynamic decision problem
in which the process of information arrival is unobserved by
the analyst. We elicit subjective information directly from
choice behavior by deriving two utility representations of
preferences over menus of acts. One representation uniquely
identifies information as a probability measure over
posteriors and the other identifies information as a
partition of the state space. We compare individuals who
expect to learn differently in terms of their preference for
flexibility. On the extended domain of dated-menus, we show
how to accommodate gradual learning over time by means of a
subjective filtration. © 2014 Elsevier Inc.},
Doi = {10.1016/j.jet.2014.07.003},
Key = {fds285778}
}
@article{fds285779,
Author = {Sadowski, P and Krishna, R},
Title = {Dynamic Preference for Flexibility},
Journal = {Econometrica},
Volume = {82},
Number = {2},
Pages = {655-703},
Publisher = {The Econometric Society},
Year = {2014},
ISSN = {0012-9682},
Doi = {10.3982/ECTA10072},
Key = {fds285779}
}
@article{fds285780,
Author = {Sadowski, P},
Title = {Contingent preference for flexibility: Eliciting beliefs
from behavior},
Journal = {Theoretical Economics},
Volume = {8},
Number = {2},
Pages = {503-534},
Publisher = {The Econometric Society},
Year = {2013},
Month = {May},
ISSN = {1933-6837},
Abstract = {Following Kreps (1979), I consider a decision maker who is
uncertain about her future taste. This uncertainty leaves
the decision maker with a preference for flexibility: When
choosing among menus that contain alternatives for future
choice, she weakly prefers menus with additional
alternatives. Standard representations that accommodate this
choice pattern cannot distinguish tastes (indexed by a
subjective state space) and beliefs (a probability measure
over the subjective states) as different concepts. I allow
choice between menus to depend on objective states. My
axioms provide a representation that uniquely identifies
beliefs, provided objective states are sufficiently relevant
for choice. I suggest that this result can provide choice
theoretic substance to the assumption, commonly made in the
(incomplete) contracting literature, that contracting
parties who know each others' ranking of contracts also
share beliefs about each others' future tastes in the face
of unforeseen contingencies. © 2013 Philipp
Sadowski.},
Doi = {10.3982/TE884},
Key = {fds285780}
}
@article{fds285775,
Author = {Dillenberger, D and Sadowski, P},
Title = {Generalized Partition and Subjective Filtration},
Journal = {Economic Research Initiatives at Duke (ERID)},
Number = {132},
Pages = {30 pages},
Year = {2012},
Month = {September},
Abstract = {We study an individual who faces a dynamic decision problem
in which the process of information arrival is unobserved by
the analyst, and hence should be identified from observed
choice data. An information structure is objectively
describable if signals correspond to events of the objective
state space. We derive a representation of preferences over
menus of acts that captures the behavior of a Bayesian
decision maker who expects to receive such signals. The
class of information structures that can support such a
representation generalizes the notion of a partition of the
state space. The representation allows us to compare
individuals in terms of the preciseness of their information
structures without requiring that they share the same prior
beliefs. We apply the model to study an individual who
anticipates gradual resolution of uncertainty over time.
Both the filtration (the timing of information arrival with
the sequence of partitions it induces) and prior beliefs are
uniquely identified.},
Key = {fds285775}
}
@article{fds285781,
Author = {Sadowski, P and Dillenberger, D},
Title = {Ashamed to Be Selfish},
Journal = {Economic Research Initiatives at Duke Working
Paper},
Volume = {7},
Number = {84},
Year = {2010},
Month = {September},
Abstract = {We study a decision maker (DM) who has preferences over
choice problems, which are sets of payoff-allocations
between herself and a passive recipient. An example of such
a set is the collection of possible allocations in the
classic dictator game. The choice of an allocation from the
set is observed by the recipient, whereas the choice of the
set itself is not. Behaving selfishly under observation, in
the sense of not choosing the normatively best allocation,
inflicts shame on DM. We derive a representation that
identifies DM's private ranking of allocations, her
subjective norm, and shame. The normatively best allocation
can be further characterized as the Nash solution of a
bargaining game induced by the second-stage choice
problem.},
Key = {fds285781}
}