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Dynamics of Inductive Inference in a Unified Framework

  • Itzhak Gilboa
  • Larry Samuelson
  • David Schmeidler

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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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000156.

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Date of creation: 31 Jul 2011
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Handle: RePEc:cla:levarc:786969000000000156
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Itzhak Gilboa & David Schmeidler, 2002. "Inductive Inference: An Axiomatic Approach," Levine's Working Paper Archive 391749000000000544, David K. Levine.
  2. Samuelson, Larry & Gilboa, Itzhak, 2012. "Subjectivity in inductive inference," Theoretical Economics, Econometric Society, vol. 7(2), May.
  3. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  4. repec:cup:cbooks:9780521741231 is not listed on IDEAS
  5. 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.
  6. Hume, David, 1758. "An Equiry Concerning Human Understanding," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number hume1758.
  7. Itzhak Gilboa & David Schmeidler, 1992. "Case-Based Decision Theory," Discussion Papers 994, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. repec:cup:cbooks:9780521802345 is not listed on IDEAS
  9. repec:cup:cbooks:9780521517324 is not listed on IDEAS
  10. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February.
  11. repec:cup:cbooks:9780521003117 is not listed on IDEAS
  12. Matsui, Akihiko, 2000. "Expected utility and case-based reasoning," Mathematical Social Sciences, Elsevier, vol. 39(1), pages 1-12, January.
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