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Updating Beliefs: Are economic agents inspired by rational action or according to ones hopes and fears?

Author

Listed:
  • Natalia González
  • Sachiko Fukano
  • Edgar Benítez

Abstract

The purpose of this investigation was to simulate a real life scenario and explore the way economic agents update their beliefs. Do they update according to what they hope? Or do they update inspired by rational behavior? We mimicked the environment which a recently high school graduate faces when entering college to see how a student updates his beliefs in regards tom his classroom position. We examined how economic agents envisage themselves through and through college and see if they update their beliefs about a hypothesis A in the light of new evidence B, or if they update their beliefs subject to what they choose they hope. In this sense we explored the possibility of setting aside the neoclassical assumption that agents are anything more than hyper rational naive optimizers acting on perfect (and in some cases, limited information)in order to turn back to an older tradition in economic theory, that is agents are recognizably human.

Suggested Citation

  • Natalia González & Sachiko Fukano & Edgar Benítez, 2004. "Updating Beliefs: Are economic agents inspired by rational action or according to ones hopes and fears?," Estudios Gerenciales, Universidad Icesi, April.
    • Handle: RePEc:col:000129:003738
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    More about this item

    Keywords

    Belief formation; rational behavior; rational choice; wishful thinking; counter wishful thinking; hopes; fears; preference relation; information processingmechanisms: Bayes approach.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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