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Is It Always Rational To Satisfy Savage'S Axioms?

  • Gilboa, Itzhak
  • Postlewaite, Andrew
  • Schmeidler, David

This note argues that, under some circumstances, it is more rational not to behave in accordance with a Bayesian prior than to do so. The starting point is that in the absence of information, choosing a prior is arbitrary. If the prior is to have meaningful implications, it is more rational to admit that one does not have sufficient information to generate a prior than to pretend that one does. This suggests a view of rationality that requires a compromise between internal coherence and justification, similarly to compromises that appear in moral dilemmas. Finally, it is argued that Savage's axioms are more compelling when applied to a naturally given state space than to an analytically constructed one; in the latter case, it may be more rational to violate the axioms than to be Bayesian.

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Article provided by Cambridge University Press in its journal Economics and Philosophy.

Volume (Year): 25 (2009)
Issue (Month): 03 (November)
Pages: 285-296

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Handle: RePEc:cup:ecnphi:v:25:y:2009:i:03:p:285-296_99
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