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Rationality of belief or: why savage's axioms are neither necessary nor sufficient for rationality

Author

Listed:
  • Itzhak Gilboa

    () (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Andrew Postlewaite
  • David Schmeidler

Abstract

Economic theory reduces the concept of rationality to internal consistency. As far as beliefs are concerned, rationality is equated with having a prior belief over a "Grand State Space", describing all possible sources of uncertainties.We argue that this notion is too weak in some senses and too strong in others. It is too weak because it does not distinguish between rational and irrational beliefs. Relatedly, the Bayesian approach, when applied to the Grand State Space, is inherently incapable of describing the formation of prior beliefs. On the other hand, this notion of rationality is too strong because 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.

Suggested Citation

  • Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2012. "Rationality of belief or: why savage's axioms are neither necessary nor sufficient for rationality," Post-Print hal-00745599, HAL.
  • Handle: RePEc:hal:journl:hal-00745599
    DOI: 10.1007/s11229-011-0034-2
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00745599
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    Cited by:

    1. Ariane Lambert-Mogiliansky & François Dubois, 2015. "Transparency in Public Life. A Quantum Cognition Perspective," Working Papers halshs-01064980, HAL.
    2. Nihad Aliyev & Xue-Zhong He, 2016. "Toward a General Model of Financial Markets," Research Paper Series 371, Quantitative Finance Research Centre, University of Technology, Sydney.
    3. Loic Berger & Valentina Bosetti, 2016. "Ellsberg re-revisited: An experiment disentangling model uncertainty and risk aversion," Working Papers 576, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Sun, Lan, 2016. "Hypothesis testing equilibrium in signaling games," Center for Mathematical Economics Working Papers 557, Center for Mathematical Economics, Bielefeld University.
    5. Ariane Lambert-Mogiliansky & François Dubois, 2015. "Our (represented) World: A Quantum-Like Object," Working Papers halshs-01152332, HAL.
    6. Loic Berger & Massimo Marinacci, 2017. "Model Uncertainty in Climate Change Economics," Working Papers 616, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    7. Paul Lewis & Richard E. Wagner, 2017. "New Austrian macro theory: A call for inquiry," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 30(1), pages 1-18, March.

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