Probabilities in Economic Modeling
18 Pages Posted: 5 Aug 2007
Date Written: August 2007
Abstract
Economic modeling assumes, for the most part, that agents are Bayesian, that is, that they entertain probabilistic beliefs, objective or subjective, regarding any event in question. We argue that the formation of such beliefs calls for a deeper examination and for explicit modeling. Models of belief formation may enhance our understanding of the probabilistic beliefs when these exist, and may also help up characterize situations in which entertaining such beliefs is neither realistic nor necessarily rational.
Keywords: Decision making, Bayesian, Behavioral Economics
JEL Classification: B4, D8
Suggested Citation: Suggested Citation
Gilboa, Itzhak and Postlewaite, Andrew and Schmeidler, David, Probabilities in Economic Modeling (August 2007). PIER Working Paper No. 07-023, Available at SSRN: https://ssrn.com/abstract=1004727 or http://dx.doi.org/10.2139/ssrn.1004727
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