Learning about a changing state

Abstract

A long-lived Bayesian agent observes costly signals of a time-varying state. He chooses the signals' precisions sequentially, balancing their costs and marginal informativeness. I compare the optimal myopic and forward-looking precisions when the state follows a Brownian motion. I also compare the myopic precisions induced by other Gaussian processes.

23 pages; 2 figures. V2 fixes typos/grammar, adds some references, and removes some footnotes