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Evidence Theory: A Mathematical Framework for Unpredictable Hypotheses

Author

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  • Guido Fioretti

    (Universita' di Siena)

Abstract

Shafer's evidence theory is a branch of the mathematics of uncertain reasoning that allows for novel possibilities to be conceived by a decision-maker. Many of its findings exhibit striking similarities with an alternative decision theory purported by Shackle in the 1950s, before expected utility maximization monopolized the scene. Evidence theory does not attempt to formalize the emergence of novelties, but it is a suitable framework for reconstructing the formation of beliefs when novelties appear. An application to decision-making in the biotech and pharmaceutical industry illustrates the potentialities of evidence theory, as well as its shortcomings.

Suggested Citation

  • Guido Fioretti, 2002. "Evidence Theory: A Mathematical Framework for Unpredictable Hypotheses," Experimental 0207001, EconWPA.
  • Handle: RePEc:wpa:wuwpex:0207001
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    References listed on IDEAS

    as
    1. Ford, J.L. & Ghose, S., 1995. "Ellsberg's Urns, Amiguity and Measures of Uncertainty: Some Experimental Evidence," Discussion Papers 95-12, Department of Economics, University of Birmingham.
    2. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February.
    3. Donald W. Katzner, 1986. "Potential Surprise, Potential Confirmation, and Probability," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(1), pages 58-78, September.
    4. Ford, J.L. & Ghose, S., 1994. "Belief, Credibility, Disbelief, Possibility, Potential Surprise and Probability as Measures of Uncertainty: Some Experimental Evidence," Discussion Papers 94-22, Department of Economics, University of Birmingham.
    5. J. L. Ford, 1987. "Economic Choice Under Uncertainty," Books, Edward Elgar Publishing, number 170.
    6. Sarin, Rakesh K & Wakker, Peter, 1992. "A Simple Axiomatization of Nonadditive Expected Utility," Econometrica, Econometric Society, vol. 60(6), pages 1255-1272, November.
    7. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
    8. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
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    Cited by:

    1. Fioretti, Guido, 2009. "Either, Or. Exploration of an Emerging Decision Theory," MPRA Paper 12897, University Library of Munich, Germany.
    2. Alexander Harin, 2006. "A Rational Irrational Man?," Microeconomics harin_alexander.34115-060, Socionet.

    More about this item

    Keywords

    Shackle; Shafer; Cognition; Innovation; Biotechnology;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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