A theory-based decision model

Edi Karni

Journal of Economic Theory, 2022, vol. 201, issue C

Abstract: This paper proposes a theory-based model of decision-making under uncertainty the main premise of which is that predictions of the outcomes of acts are derived from theories. Realized act-outcome pairs provide information on the basis of which decision makers update their beliefs regarding the validity of the underlying theories. Consequently, acts are, simultaneously, information–generating initiatives, or experiments, that have material consequences. Experiments, that is, information–generating initiatives of no direct material consequences, are characterized and the value of information they generate defined. An incentive-compatible mechanism is introduced by which the beliefs decision-makers holds regarding the validity of the theories are elicited.

Keywords: Theory-based decisions; Experimentation; Value of information; Subjective probabilities; Probability elicitation (search for similar items in EconPapers)
JEL-codes: D8 D81 D83 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053122000345
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:201:y:2022:i:c:s0022053122000345

DOI: 10.1016/j.jet.2022.105444

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().