Conditional hypothesis testing systems

Xiao Luo and Xuewen Qian

Journal of Mathematical Economics, 2025, vol. 120, issue C

Abstract: We introduce the notion of a Conditional Hypothesis Testing System (CHTS) that specifies the concrete mode of non-Bayesian reactions to unexpected news in a conditional world. We show that Ortoleva’s (2012) Hypothesis Testing Model (HTM) has an alternative CHTS representation, and thus Ortoleva’s axioms also characterize CHTS. We demonstrate the concept of CHTS can be used to derive the conditional-probability-system expected utility model of Myerson (1986a). In addition, we formulate and show that the CHTS updating rule is order independent—i.e., the order of receiving uncontradictory information never influences the final posterior under the updating rule in all conditioning events. Our study sheds light on the (coherent) dynamic structure of HTM in all conditional worlds.

Keywords: HTM; CHTS; Dynamic coherence; Subjective expected utility; Non-Bayesian updating; Order independence (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:120:y:2025:i:c:s0304406825000734

DOI: 10.1016/j.jmateco.2025.103156

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