Risk, Unexpected Uncertainty, and Estimation Uncertainty: Bayesian Learning in Unstable Settings
Elise Payzan-LeNestour, Peter Bossaerts
PLoS Computational Biology | PUBLIC LIBRARY SCIENCE | Published : 2011
Recently, evidence has emerged that humans approach learning using Bayesian updating rather than (model-free) reinforcement algorithms in a six-arm restless bandit problem. Here, we investigate what this implies for human appreciation of uncertainty. In our task, a Bayesian learner distinguishes three equally salient levels of uncertainty. First, the Bayesian perceives irreducible uncertainty or risk: even knowing the payoff probabilities of a given arm, the outcome remains uncertain. Second, there is (parameter) estimation uncertainty or ambiguity: payoff probabilities are unknown and need to be estimated. Third, the outcome probabilities of the arms change: the sudden jumps are referred to..View full abstract
The authors acknowledge financial support from the Swiss Finance Institute and from NCCR FINRISK of the Swiss National Science Foundation. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript application.