Multiple Priors as Similarity Weighted Frequencies

Jürgen Eichberger and Ani Guerdjikova

No 08-07, Papers from Sonderforschungsbreich 504

Abstract: In this paper, we consider a decision-maker who tries to learn the distribution of outcomes from previously observed cases. For each observed sequence of cases the decision-maker predicts a set of priors expressing his beliefs about the underlying probability distribution. We impose a version of the concatenation axiom introduced in BILLOT, GILBOA, SAMET AND SCHMEIDLER (2005) which insures that the sets of priors can be represented as a weighted sum of the observed frequencies of cases. The weights are the uniquely determined similarities between the observed cases and the case under investigation.

Date: 2008
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