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Subjective Bayesian beliefs

Author

Listed:
  • Constantinos Antoniou
  • Glenn Harrison
  • Morten Lau
  • Daniel Read

Abstract

A large literature suggests that many individuals do not apply Bayes’ Rule when making decisions that depend on them correctly pooling prior information and sample data. We replicate and extend a classic experimental study of Bayesian updating from psychology, employing the methods of experimental economics, with careful controls for the confounding effects of risk aversion. Our results show that risk aversion significantly alters inferences on deviations from Bayes’ Rule. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Constantinos Antoniou & Glenn Harrison & Morten Lau & Daniel Read, 2015. "Subjective Bayesian beliefs," Journal of Risk and Uncertainty, Springer, vol. 50(1), pages 35-54, February.
    • Handle: RePEc:kap:jrisku:v:50:y:2015:i:1:p:35-54
    DOI: 10.1007/s11166-015-9208-5
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    Cited by:

    1. Konstantinos Georgalos, 2019. "An experimental test of the predictive power of dynamic ambiguity models," Journal of Risk and Uncertainty, Springer, vol. 59(1), pages 51-83, August.
    2. Nils Grevenbrock & Max Groneck & Alexander Ludwig & Alexander Zimper, 2021. "Cognition, Optimism, And The Formation Of Age‐Dependent Survival Beliefs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(2), pages 887-918, May.
    3. Alexander Coutts, 2019. "Good news and bad news are still news: experimental evidence on belief updating," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 369-395, June.
    4. Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd & Ulm, Eric R., 2017. "Scoring rules for subjective probability distributions," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 430-448.
    5. Daniel J. Benjamin, 2018. "Errors in Probabilistic Reasoning and Judgment Biases," NBER Working Papers 25200, National Bureau of Economic Research, Inc.
    6. Tsang, Ming, 2022. "Risk perception in an endogenous information environment," Research in Economics, Elsevier, vol. 76(4), pages 355-372.
    7. Georgalos, Konstantinos, 2021. "Dynamic decision making under ambiguity: An experimental investigation," Games and Economic Behavior, Elsevier, vol. 127(C), pages 28-46.
    8. Alexander Coutts, 2017. "Good news and bad news are still news: Experimental evidence on belief updating," FEUNL Working Paper Series novaf:wp1703, Universidade Nova de Lisboa, Faculdade de Economia.
    9. Flores-Szwagrzak, Karol, 2022. "Learning by Convex Combination," Working Papers 16-2022, Copenhagen Business School, Department of Economics.

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    More about this item

    Keywords

    Bayes’ Rule; Subjective beliefs; Learning; D03; D81; D83;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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