Before choosing her action to match the state of the world, an agent observes a stream of messages generated by some unknown binary signal. The agent can either learn the underlying signal for free and update her belief accordingly or ignore the observed message and keep her prior belief. After...

Before choosing her action to match the state of the world, an agent observes a stream of messages generated by some unknown binary signal. The agent can either learn the underlying signal for free and update her belief accordingly or ignore the observed message and keep her prior belief. After...

In the first chapter, I analyze the question that whether the elasticity ofintertemporal substitution or risk aversion is more important determinant of precautionarysavings. This is an important question since a significant fraction of the capitalaccumulation is due to precautionary savings...