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Non-Bayesian Updating: a Theoretical Framework

  • Larry Epstein


    (University of Rochester)

  • Jawwad Noor


    (University of Rochester)

  • Alvaro Sandroni


    (J.L.Kellogg School of Management, MEDS, Northwestern University)

This paper models an agent in a multi-period setting who does not update according to Bayes. Rule, and who is self-aware and anticipates her updating behavior when formulating plans. Choice-theoretic axiomatic foundations are provided. Then the model is specialized axiomatically to capture updating biases that re.ect excessive weight given to (i) prior be- liefs, or alternatively, (ii) the realized sample. Finally, the paper describes a counterpart of the exchangeable Bayesian model, where the agent tries to learn about parameters, and some answers are provided to the question, "what does a non-Bayesian updater learn?"

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Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 518.

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Length: 49 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:roc:rocher:518
Contact details of provider: Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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  1. W. Pesendorfer & F. Gul, 1999. "Self-Control and the Theory of Consumption," Princeton Economic Theory Papers 99f2, Economics Department, Princeton University.
  2. Larry Epstein & Michael Peters, 1996. "A Revelation Principle For Competing Mechanisms," Working Papers peters-96-02, University of Toronto, Department of Economics.
  3. Leonid Kogan & Stephen Ross, 2004. "The Price Impact and Survival of Irrational Traders," 2004 Meeting Papers 35, Society for Economic Dynamics.
  4. Larry G. Epstein, 2006. "An Axiomatic Model of Non-Bayesian Updating," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 413-436.
  5. Adam Brandenburger & Eddie Dekel, 2014. "Hierarchies of Beliefs and Common Knowledge," World Scientific Book Chapters, in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 2, pages 31-41 World Scientific Publishing Co. Pte. Ltd..
  6. Jawwad Noor, 2006. "Temptation, Welfare and Revealed Preference," Boston University - Department of Economics - Working Papers Series WP2006-025, Boston University - Department of Economics.
  7. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  8. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
  9. Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
  10. Kopylov Igor, 2009. "Temptations in General Settings," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, September.
  11. Epstein, Larry G & Wang, Tan, 1996. ""Beliefs about Beliefs" without Probabilities," Econometrica, Econometric Society, vol. 64(6), pages 1343-73, November.
  12. Rabin, Matthew, 2000. "Inference by Believers in the Law of Small Numbers," Department of Economics, Working Paper Series qt4sw8n41t, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  13. Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 31(1), pages 133-152, October.
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