Updating confidence in beliefs

Brian Hill

Journal of Economic Theory, 2022, vol. 199, issue C

Abstract: This paper develops a belief update rule under ambiguity, motivated by the maxim: in the face of new information, retain those conditional beliefs in which you are more confident, and relinquish only those in which you have less confidence. We provide a preference-based axiomatisation, drawing on the account of confidence in beliefs developed in Hill (2013). The proposed rule constitutes a general framework of which several existing rules for multiple priors (Full Bayesian, Maximum Likelihood) are special cases, but avoids the problems that these rules have with updating on complete ignorance. Moreover, it can handle surprising and null events, such as crises or reasoning in games, recovering traditional approaches, such as conditional probability systems, as special cases.

Keywords: Belief update; Ambiguity; Multiple priors; Confidence; Complete ignorance; Update on surprising or null events (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:199:y:2022:i:c:s0022053121000260

DOI: 10.1016/j.jet.2021.105209

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