Subjective Bayesian Beliefs
44 Pages Posted: 10 Apr 2013 Last revised: 26 Dec 2019
Date Written: August 2013
A large literature suggests that many individuals do not apply Bayes Rule correctly when making decisions that depend on them correctly pooling prior information and sample data. We replicate and extend a classic experimental study of Bayesian updating from psychology, employing the methods of experimental economics, with careful controls for the confounding effects of risk aversion. Our results show that risk aversion significantly alters inferences on deviations from Bayes Rule.
Keywords: Bayesian Updating, Risk Aversion, Probability Weighting
JEL Classification: B41, C51, C91, D81, G12
Suggested Citation: Suggested Citation