2023/03/11 by Adam Dominiak, Dominiak, Adam, Matthew Kovach +3
Decision Sciences · Social Sciences · #Decision-Making and Behavioral Economics #Experimental Behavioral Economics Studies #FOS: Economics and business #Forecasting Techniques and Applications #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2303.06336
openalex publication_date 2023/03/11 · openalex created_date 2023/03/16 · openalex updated_date 2026/07/28
We introduce and characterize inertial updating of beliefs. Under inertial updating, a decision maker (DM) chooses a belief that minimizes the subjective distance between their prior belief and the set of beliefs consistent with the observed event. Importantly, by varying the subjective notion of distance, inertial updating provides a unifying framework that nests three different types of belief updating: (i) Bayesian updating, (ii) non-Bayesian updating rules, and (iii) updating rules for events with zero probability, including the conditional probability system (CPS) of Myerson (1986a,b). We demonstrate that our model is behaviorally equivalent to the Hypothesis Testing model (HT) of Ortoleva (2012), clarifying the connection between HT and CPS. We apply our model to a persuasion game.