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IS IT ALWAYS RATIONAL TO SATISFY SAVAGE'S AXIOMS?

  • Itzhak Gilboa (a1), Andrew Postlewaite (a2) and David Schmeidler (a3)
Abstract

This note argues that, under some circumstances, it is more rational not to behave in accordance with a Bayesian prior than to do so. The starting point is that in the absence of information, choosing a prior is arbitrary. If the prior is to have meaningful implications, it is more rational to admit that one does not have sufficient information to generate a prior than to pretend that one does. This suggests a view of rationality that requires a compromise between internal coherence and justification, similarly to compromises that appear in moral dilemmas. Finally, it is argued that Savage's axioms are more compelling when applied to a naturally given state space than to an analytically constructed one; in the latter case, it may be more rational to violate the axioms than to be Bayesian.

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Economics & Philosophy
  • ISSN: 0266-2671
  • EISSN: 1474-0028
  • URL: /core/journals/economics-and-philosophy
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