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American Economic Review: Vol. 103 No. 7 (December 2013)

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"Reverse Bayesianism": A Choice-Based Theory of Growing Awareness

Article Citation

Karni, Edi, and Marie-Louise Vierø. 2013. ""Reverse Bayesianism": A Choice-Based Theory of Growing Awareness." American Economic Review, 103(7): 2790-2810.

DOI: 10.1257/aer.103.7.2790

Abstract

This article introduces a new approach to modeling the expanding universe of decision makers in the wake of growing awareness, and invokes the axiomatic approach to model the evolution of decision makers' beliefs as awareness grows. The expanding universe is accompanied by extension of the set of acts, the preference relations over which are linked by a new axiom, invariant risk preferences, asserting that the ranking of lotteries is independent of the set of acts under consideration. The main results are representation theorems and rules for updating beliefs over expanding state spaces and events that have the flavor of "reverse Bayesianism."

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Authors

Karni, Edi (Johns Hopkins U)
Vierø, Marie-Louise (Queen's U, Kingston)

JEL Classifications

D81: Criteria for Decision-Making under Risk and Uncertainty
D83: Search; Learning; Information and Knowledge; Communication; Belief


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