Bayesian Inference Does Not Lead You Astray... On Average

Alejandro Francetich and David Kreps

No 514, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: A decision maker faces an unobserved state of nature. She updates her prior on the state based on the realizations of a signal. In this note, we show that the expected posterior on any given state, taking expectation under the conditional distribution of the signal on this same state, is never lower than the prior on said state. In other words, the expected posterior probability on the true state is never lower than the prior on this state, regardless of what the true state is.

Date: 2014
New Economics Papers: this item is included in nep-cta and nep-mic
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Citations: View citations in EconPapers (5)

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Working Paper: Bayesian Inference Does Not Lead You Astray... On Average (2014)
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