Speaker: Inga Deimen, Department of Economics, University of Arizona
Presentation Title: Rationalizing Mindsets. A Bandit Model of Two-Dimensional Uncertainty
Abstract: An agent is faced with a task and she is uncertain whether success can be achieved through effort or if it is only her natural ability that counts. Since in addition she does not know her own ability level, she is confronted with two-dimensional uncertainty. In each period, after deciding whether to exert effort or not, the agent observes a success or a failure and updates her beliefs about both the task and her ability accordingly. The agent gains information even when she is not exerting effort, therefore the task can be understood as a restless bandit. We characterize the agent's optimal strategy and show that different agents react to failure in different ways: while some agents find it optimal to resign, others prefer to increase their effort. Moreover, the optimal strategy may include repeated starting and stopping of exerting effort.
Bio: Inga Deimen is an assistant professor in the Department of Economics at the Eller College of Management, University of Arizona, where she has been a faculty member since 2017. Deimen completed her Ph.D. in Economics at the University of Bonn. Her research explores strategies that people and firms use in communications. Her current inquiries are around information transmission and information design. Additionally, she researches on optimal experimentation, mindsets and voting. Her paper on consistency and communication in committees was published in the Journal of Economic Theory.