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Subjectivity in inductive inference

Author

Listed:
  • Samuelson, Larry

    () (Department of Economics, Yale University)

  • Gilboa, Itzhak

    () (HEC, Paris and School of Economics, Tel-Aviv University)

Abstract

This paper examines circumstances under which subjectivity enhances the effectiveness of inductive reasoning. We consider agents facing a data generating process who are characterized by inference rules that may be purely objective (or data-based) or may incorporate subjective considerations. The basic intuition is that agents who invoke no subjective considerations are doomed to "overfit" the data and therefore engage in ineffective learning. The analysis places no computational or memory limitations on the agents|the role for subjectivity emerges in the presence of unlimited reasoning powers.

Suggested Citation

  • Samuelson, Larry & Gilboa, Itzhak, 2012. "Subjectivity in inductive inference," Theoretical Economics, Econometric Society, vol. 7(2), May.
  • Handle: RePEc:the:publsh:845
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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20120183/6723/220
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    References listed on IDEAS

    as
    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 69(1), pages 99-118.
    2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
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    Cited by:

    1. Gilboa, Itzhak & Samuelson, Larry & Schmeidler, David, 2013. "Dynamics of inductive inference in a unified framework," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1399-1432.

    More about this item

    Keywords

    Inductive inference; simplicity; prediction; learning;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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