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Dynamics of inductive inference in a unified framework

  • Gilboa, Itzhak
  • Samuelson, Larry
  • Schmeidler, David

We present a model of inductive inference that includes, as special cases, Bayesian reasoning, case-based reasoning, and rule-based reasoning. This unified framework allows us to examine how the various modes of inductive inference can be combined and how their relative weights change endogenously. For example, we establish conditions under which an agent who does not know the structure of the data generating process will decrease, over the course of her reasoning, the weight of credence put on Bayesian vs. non-Bayesian reasoning. We illustrate circumstances under which probabilistic models are used until an unexpected outcome occurs, whereupon the agent resorts to more basic reasoning techniques, such as case-based and rule-based reasoning, until enough data are gathered to formulate a new probabilistic model.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 148 (2013)
Issue (Month): 4 ()
Pages: 1399-1432

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Handle: RePEc:eee:jetheo:v:148:y:2013:i:4:p:1399-1432
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. repec:cup:cbooks:9780521802345 is not listed on IDEAS
  2. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  3. Itzhak Gilboa & David Schmeidler, 1991. "Updating Ambiguous Beliefs," Discussion Papers 924, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Hume, David, 1758. "An Equiry Concerning Human Understanding," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number hume1758.
  5. Itzhak Gilboa & David Schmeidler, 1992. "Case-Based Decision Theory," Discussion Papers 994, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Itzhak Gilboa & Larry Samuelson, 2009. "Subjectivity in Inductive Inference," Cowles Foundation Discussion Papers 1725, Cowles Foundation for Research in Economics, Yale University.
  7. Alquist, Ron & Kilian, Lutz, 2007. "What Do We Learn from the Price of Crude Oil Futures?," CEPR Discussion Papers 6548, C.E.P.R. Discussion Papers.
  8. Itzhak Gilboa & David Schmeidler, 2002. "Inductive Inference: An Axiomatic Approach," Levine's Working Paper Archive 391749000000000544, David K. Levine.
  9. repec:cup:cbooks:9780521003117 is not listed on IDEAS
  10. Matsui, Akihiko, 2000. "Expected utility and case-based reasoning," Mathematical Social Sciences, Elsevier, vol. 39(1), pages 1-12, January.
  11. repec:cup:cbooks:9780521517324 is not listed on IDEAS
  12. repec:cup:cbooks:9780521741231 is not listed on IDEAS
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