2021/01/30 by Matthew Kovach, Kovach, Matthew · 1 citation
Decision Sciences · Economics, Econometrics and Finance · #Decision-Making and Behavioral Economics #FOS: Economics and business #Game Theory and Voting Systems #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2102.00152
openalex publication_date 2021/01/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
This paper provides a behavioral analysis of conservatism in beliefs. I introduce a new axiom, Dynamic Conservatism, that relaxes Dynamic Consistency when information and prior beliefs "conflict." When the agent is a subjective expected utility maximizer, Dynamic Conservatism implies that conditional beliefs are a convex combination of the prior and the Bayesian posterior. Conservatism may result in belief dynamics consistent with confirmation bias, representativeness, and the good news-bad news effect, suggesting a deeper behavioral connection between these biases. An index of conservatism and a notion of comparative conservatism are characterized. Finally, I extend conservatism to the case of an agent with incomplete preferences that admit a multiple priors representation.