Updating toward the signal
AbstractModelers frequently assume (either implicitly or explicitly) that an agent’s posterior expectation of some variable lies between their prior mean and the realization of an unbiased signal of that variable. We call this property updating toward the signal (UTS). We show that if the prior and signal error densities are both symmetric and quasiconcave then UTS will occur. If, for a given prior, UTS occurs for all symmetric and quasiconcave error densities, then in fact the prior must be symmetric and quasiconcave. Similar characterizations are derived for two additional updating requirements that are strictly weaker than UTS. Copyright The Author(s) 2012
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 50 (2012)
Issue (Month): 3 (August)
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Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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