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Processing consistency in non-Bayesian inference

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  • He, Xue Dong
  • Xiao, Di

Abstract

We propose a coherent inference model that is obtained by distorting the prior density in Bayes’ rule and replacing the likelihood with a so-called pseudo-likelihood. This model includes the existing non-Bayesian inference models as special cases and implies new models of base-rate neglect and conservatism. We prove a sufficient and necessary condition under which the coherent inference model is processing consistent, i.e., implies the same posterior density however the samples are grouped and processed retrospectively. We further show that processing consistency does not imply Bayes’ rule by proving a sufficient and necessary condition under which the coherent inference model can be obtained by applying Bayes’ rule to a false stochastic model.

Suggested Citation

  • He, Xue Dong & Xiao, Di, 2017. "Processing consistency in non-Bayesian inference," Journal of Mathematical Economics, Elsevier, vol. 70(C), pages 90-104.
    • Handle: RePEc:eee:mateco:v:70:y:2017:i:c:p:90-104
    DOI: 10.1016/j.jmateco.2017.02.004
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