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Rationality of Belief

Author

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  • Itzhak Gilboa
  • Andrew Postlewaite
  • David Schmeidler

Abstract

Economic theory reduces the concept of rationality to internal consistency. The practice of economics, however, distinguishes between rational and irrational beliefs. There is therefore an interest in a theory of rational beliefs, and of the process by which beliefs are generated and justified. We argue that the Bayesian approach is unsatisfactory for this purpose, for several reasons. First, the Bayesian approach begins with a prior, and models only a very limited form of learning, namely, Bayesian updating. Thus, it is inherently incapable of describing the formation of prior beliefs. Second, there are many situations in which there is not sufficient information for an individual to generate a Bayesian prior. It follows that the Bayesian approach is neither sufficient not necessary for the rationality of beliefs.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2004. "Rationality of Belief," Levine's Bibliography 122247000000000690, UCLA Department of Economics.
  • Handle: RePEc:cla:levrem:122247000000000690
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    References listed on IDEAS

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    Cited by:

    1. Tigran Melkonyan & Mark Pingle, 2010. "Ambiguity, pessimism, and rational religious choice," Theory and Decision, Springer, vol. 69(3), pages 417-438, September.
    2. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2007. "Probabilities in Economic Modeling," PIER Working Paper Archive 07-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Itzhak Gilboa & Offer Lieberman & David Schmeidler, 2007. "On the Definition of Objective Probabilities by Empirical Similarity," Levine's Bibliography 843644000000000363, UCLA Department of Economics.
    4. Scott Condie & Jayant V. Ganguli, 2011. "Ambiguity and Rational Expectations Equilibria," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 821-845.
    5. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2007. "Probabilities in Economic Modeling," PIER Working Paper Archive 07-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

    More about this item

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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