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Classroom Games: Understanding Bayes' Rule

Author

Listed:
  • Charles A. Holt
  • Lisa R. Anderson

Abstract

This paper uses the technique of experimental economics to set up a classroom situation where students learn to make Bayesian decisions. The exercises allow students to discover for themselves a natural counting heuristic that corresponds to Bayes's rule and is much quicker to use in many situations. In the context of balls and urns, this heuristic involves adjusting ball counts to reflect prior probabilities. It provides a natural bridge between simple intuition and the mathematical formula for Bayes's rule that is presented in undergraduate courses in economic statistics, game theory, and managerial economics.

Suggested Citation

  • Charles A. Holt & Lisa R. Anderson, 1996. "Classroom Games: Understanding Bayes' Rule," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 179-187, Spring.
  • Handle: RePEc:aea:jecper:v:10:y:1996:i:2:p:179-87
    Note: DOI: 10.1257/jep.10.2.179
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.2.179
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    References listed on IDEAS

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    1. Salop, Steven C, 1987. "Evaluating Uncertain Evidence with Sir Thomas Bayes: A Note for Teachers," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 155-159, Summer.
    2. Grether, David M., 1992. "Testing bayes rule and the representativeness heuristic: Some experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 31-57, January.
    3. David M. Grether, 1980. "Bayes Rule as a Descriptive Model: The Representativeness Heuristic," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 537-557.
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    Cited by:

    1. Juan Pablo Herrera & Francisco Lozano Gerena, 2005. "Modelo de manadas y aprendizaje social," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 7(13), pages 133-157, July-Dece.
    2. Gomez, Miguel I. & Rao, Vithala R. & Yuan, Hong, 2009. "A Market Experiment on Trade Promotion Budget and Allocation," Working Papers 55928, Cornell University, Department of Applied Economics and Management.

    More about this item

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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