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Bayesian Updating for Complementarily Additive Beliefs under Ambiguity

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  • Mayumi Horie

    (Hiroshima University of Economics)

Abstract

This paper proposes a formal characterization of extended Bayesian updating for complementarily additive subjective beliefs under ambiguity, which are compatible with a wide range of choice behavior toward ambiguity. The main result shows that, based on the biseparability of Ghirardato and Marinacci (2001), extended Bayesian updating characterizes the update rule which is a step-by-step composite updating for priors, where one of Dempster-Shafer rule, Bayes'update rule and Fagin-Halpern rule is applied to each step. As applications, more speciÂ…c preference relations are examined, such as the maxmin expected utility, the rank-dependent expected utility, and the concave expected utility preferences by Lehrer (2009).

Suggested Citation

  • Mayumi Horie, 2016. "Bayesian Updating for Complementarily Additive Beliefs under Ambiguity," KIER Working Papers 935, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:935
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP935.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    ambiguous belief; Bayesian update rule; multiple priors; non-additive measure; subjective probability; biseparable preference;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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