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Probability and Uncertainty in Economic Modeling, Second Version

Author

Listed:
  • Itzhak Gilboa

    (Department of Economic, Tel-Aviv University)

  • Andrew Postlewaite

    (Department of Economics, University of Pennsylvania)

  • David Schmeidler

    (Department of Economics, 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. "Probability and Uncertainty in Economic Modeling, Second Version," PIER Working Paper Archive 08-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jan 2008.
    • Handle: RePEc:pen:papers:08-002
    as

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    References listed on IDEAS

    as
    1. 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..
    2. 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..
    3. 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.
    4. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
    5. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2004. "Rationality of Belief. Or: Why Bayesianism is Neither Necessary nor Sufficient for Rationality," Cowles Foundation Discussion Papers 1484, Cowles Foundation for Research in Economics, Yale University.
    6. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
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    9. 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.
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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

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