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Probabilities in Economic Modeling

Author

Listed:
  • Itzhak Gilboa

    (Tel-Aviv University, HEC, and Cowles Foundation, Yale University)

  • Andrew Postlewaite

    (Department of Economics, University of Pennsylvania)

  • David Schmeidler

    (Tel-Aviv University and Ohio State University)

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.

Suggested Citation

  • Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2007. "Probabilities in Economic Modeling," PIER Working Paper Archive 07-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:07-023
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    References listed on IDEAS

    as
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    4. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2004. "Rationality of Belief Or: Why Savage's axioms are neither necessary nor sufficient for rationality, Second Version," PIER Working Paper Archive 07-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Jan 2007.
    5. Lars Peter Hansen & Thomas J Sargent, 2014. "Robust Permanent Income and Pricing," World Scientific Book Chapters, in: UNCERTAINTY WITHIN ECONOMIC MODELS, chapter 3, pages 33-81, World Scientific Publishing Co. Pte. Ltd..
    6. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, number 9780521802345.
    7. Itzhak Gilboa & Offer Lieberman & David Schmeidler, 2012. "Empirical Similarity," World Scientific Book Chapters, in: Case-Based Predictions An Axiomatic Approach to Prediction, Classification and Statistical Learning, chapter 9, pages 211-243, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    Decision making; Bayesian; Behavioral Economics;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

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