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Conditional hypothesis testing systems

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  • Luo, Xiao
  • Qian, Xuewen

Abstract

We introduce the notion of a Conditional Hypothesis Testing System (CHTS) that specifies the concrete mode of non-Bayesian reactions to unexpected news in a conditional world. We show that Ortoleva’s (2012) Hypothesis Testing Model (HTM) has an alternative CHTS representation, and thus Ortoleva’s axioms also characterize CHTS. We demonstrate the concept of CHTS can be used to derive the conditional-probability-system expected utility model of Myerson (1986a). In addition, we formulate and show that the CHTS updating rule is order independent—i.e., the order of receiving uncontradictory information never influences the final posterior under the updating rule in all conditioning events. Our study sheds light on the (coherent) dynamic structure of HTM in all conditional worlds.

Suggested Citation

  • Luo, Xiao & Qian, Xuewen, 2025. "Conditional hypothesis testing systems," Journal of Mathematical Economics, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:mateco:v:120:y:2025:i:c:s0304406825000734
    DOI: 10.1016/j.jmateco.2025.103156
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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