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Maxim Raginsky's avatar

Yeah, I am 100% with Meehl that there is no algorithm for converting vibes to probabilities. But there is an algorithm for revising the already given probabilities, and it relies on de Finetti's ideas of coherence (which can be reconciled with Kolmogorov's axioms: https://www.sciencedirect.com/science/article/pii/S0167715203003572). I like to think of the requirements of coherence as a potential field that enforces global constraints by exerting forces on local, possibly incoherent, probability assessments.

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John Quiggin's avatar

Here's my take on these issues

Grant, S., A. Guerdjikova, and J. Quiggin. 2020. Ambiguity and Awareness: A Coherent Multiple Priors Model. The B.E. Journal of Theoretical Economics 0

Ambiguity in the ordinary language sense means that available information is open to multiple interpretations. We model this by assuming that individuals are unaware of some possibilities relevant to the outcome of their decisions and that multiple probabilities may arise over an individual’s subjective state space depending on which of these possibilities are realized. We formalize a notion of <jats:italic>coherent</jats:italic> multiple priors and derive a representation result that with full awareness corresponds to the usual unique (Bayesian) prior but with less than full awareness generates multiple priors. When information is received with no change in awareness, each element of the set of priors is updated in the standard Bayesian fashion (that is, full Bayesian updating). An increase in awareness, however, leads to an expansion of the individual’s subjective state and (in general) a contraction in the set of priors under consideration.

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