Summary, Directions for Future Research

The study has explored the econometric implications of the presence of an agent in the data generating mechanism who performs learning. It related the issues addressed to major areas in the literature. An illustrative model was presented in which even in the absence of any explicit dynamics the problem became nontrivial and dynamic by virtue of the presence of learning about the unknown parameter. The agent had to strike an optimal balance between current payoff maximization and generation of information in the future. The distinction between active and passive learning was made. On the basis of an argument on the curvature of the value function arising in the problem, active learning was shown to be generically optimal.