Econometrica: Nov 2016, Volume 84, Issue 6

Random Choice and Private Information
p. 1983-2027

Jay Lu

We consider an agent who chooses an option after receiving some private information. This information, however, is unobserved by an analyst, so from the latter's perspective, choice is probabilistic or random. We provide a theory in which information can be fully identified from random choice. In addition, the analyst can perform the following inferences even when information is unobservable: (1) directly compute ex ante valuations of menus from random choice and vice versa, (2) assess which agent has better information by using choice dispersion as a measure of informativeness, (3) determine if the agent's beliefs about information are dynamically consistent, and (4) test to see if these beliefs are well‐calibrated or rational.

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Supplemental Material

Supplement to "Random Choice and Private Information"

This supplement uses the notation and definitions established in the main paper. Theorems, propositions and lemmas are numbered S.1, S.2, etc. in this supplement. Numbers without the prefix S refer those in the main paper.

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