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Demand-Theoretic Approach to Choice of Priors

Author

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  • Chollete, Loran

    (UiS)

  • Schmeidler, David

    (Tel Aviv University)

Abstract

Decision theory has relatively little to say about the formal choice of priors. We pursue the issue of prior choice in a framework that builds on consumer theory. We analyze discovery decisions of a reasoner, in an environment of hypotheses with heterogeneous, subjective plausibility. We illustrate implications for equilibrium selection when hypotheses that differ in terms of optimism are selected from a distribution with latent probabilities.

Suggested Citation

  • Chollete, Loran & Schmeidler, David, 2014. "Demand-Theoretic Approach to Choice of Priors," UiS Working Papers in Economics and Finance 2014/14, University of Stavanger.
    • Handle: RePEc:hhs:stavef:2014_014
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    References listed on IDEAS

    as
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    Cited by:

    1. Chollete, Loran & Schmeidler, David, 2014. "Extreme Events and the Origin of Central Bank Priors," UiS Working Papers in Economics and Finance 2014/15, University of Stavanger.

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    More about this item

    Keywords

    Belief Disagreement; Discovery Decision; Latent Probability; Subjective Evidence;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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