Subjective Contingencies and Limited Bayesian Updating

Stefania Minardi and Andrei Savochkin

No w0222, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: We depart from Savage’s (1954) common state space assumption and introduce a model that allows for a subjective understanding of uncertainty. Within the revealed preference paradigm, we uniquely identify the agent’s subjective state space via her preferences conditional on incoming information. According to our representation, the agent’s subjective contingencies are coarser than the analyst’s states; she uses an additively separable utility with respect to her set of contingencies; and she adopts an updating rule that follows the Bayesian spirit but is limited by her perception of uncertainty. We illustrate our theory with an application to the Confirmatory Bias.

Pages: 49 pages
Date: 2016-10
New Economics Papers: this item is included in nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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http://www.cefir.ru/papers/WP222.pdf (application/pdf)

Related works:
Journal Article: Subjective contingencies and limited Bayesian updating (2019)
Working Paper: Subjective Contingencies and Limited Bayesian Updating (2017)
Working Paper: Subjective Contingencies and Limited Bayesian Updating (2017)
Working Paper: Subjective Contingencies and Limited Bayesian Updating (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cfr:cefirw:w0222

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