Updating ambiguous beliefs

14-Mar-2017 15:56

It turns out that for decision makers which can be described by both theories, the two approaches coincide.Thus, we suggest a pseudo-Bastion foundation to classical statistics, which may also motivate alternative statistical inference techniques, and provide an axiomatically-based ambiguous belies update rule, which is needed for their application in many economic theory models.One of our main contributions is showing that the model provides a formal foundation for why agents who observe exactly the same stream of information can end up becoming increasingly polarized in their posteriors.Updating beliefs with ambiguous evidence : implications for polarization/Roland G Fryer; Philipp Harms; Matthew O Jackson; National Bureau of Economic Research.; Cambridge, Mass. The decision maker has conditional preferences over acts.It is assumed that preferences over acts conditional on event , obey axioms which lead to maxmin expected utility representation with multiple priors, and have common induced preferences over lotteries.When preferences are such that there is no unique additive prior, the issue of which updating rule to use is of extreme importance.

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We show that such rules are optimal if agents sufficiently discount the future; while if they are very patient then a time-varying random interpretation rule becomes optimal.Date: 1991-02 References: Add references at Cit Ec Citations View citations in Econ Papers (13) Track citations by RSS feed Downloads: (external link) text (application/pdf) Related works: Journal Article: Updating Ambiguous Beliefs (1993) Working Paper: Updating Ambiguous Beliefs (1993)This item may be available elsewhere in Econ Papers: Search for items with the same title.Antonio Guarino is a Professor of Economics in the Department of Economics at UCL.Attitudes towards sequential versus simultaneous resolution of uncertainty for a simple bet are analyzed.

We show that for a class of recursive CEU preferences which exhibit both optimism and pessimism, a 'good-news' signal is preferred to no signal which is preferred to a 'bad-news' signal.updating ambiguous beliefs, Full Bayesian Updating, Choquet Expected Utility, optimism, pessimism, recursive preferences.This is challenging, since prior to observing (symmetric) draws from the urns, the MEU decision-maker (in line with the usual notion of ambiguity aversion) actually preferred the risky over the ambiguous bet and was less willing to bet on the ambiguous urn than the SEU decision-maker.The identified switch in betting preferences is not due to a violation of dynamic consistency or consequentialism.We introduce and analyze a model in which agents observe sequences of signals about the state of the world, some of which are ambiguous and open to interpretation.

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