arXiv Open Access 2020

Information Validates the Prior: A Theorem on Bayesian Updating and Applications

Navin Kartik Frances Lee Wing Suen

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Abstrak

We develop a result on expected posteriors for Bayesians with heterogenous priors, dubbed information validates the prior (IVP). Under familiar ordering requirements, Anne expects a (Blackwell) more informative experiment to bring Bob's posterior mean closer to Anne's prior mean. We apply the result in two contexts of games of asymmetric information: voluntary testing or certification, and costly signaling or falsification. IVP can be used to determine how an agent's behavior responds to additional exogenous or endogenous information. We discuss economic implications.

Topik & Kata Kunci

econ.TH

Penulis (3)

Navin Kartik

Frances Lee

Wing Suen

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Kartik, N., Lee, F., Suen, W. (2020). Information Validates the Prior: A Theorem on Bayesian Updating and Applications. https://arxiv.org/abs/2005.05714

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Tahun Terbit: 2020
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓