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 Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/27195

 Title: Symmetry of evidence without evidence of symmetry Authors: Larry G. Epstein; Department of Economics, Boston UniversityKyoungwon Seo; Department of Managerial Economics and Decision Sciences, Northwestern University Keywords: Ambiguity, exchangeability, symmetry, updating, learning, multiple-priorsD81 Issue Date: 22-Sep-2010 Publisher: Theoretical Economics Citation: Theoretical Economics; Vol 5, No 3 (2010) Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] The de Finetti Theorem is a cornerstone of the Bayesian approach. Bernardo (1996) writes that its "message is very clear: if a sequence of observations is judged to be exchangeable, then any subset of them must be regarded as a random sample from some model, and there exists a prior distribution on the parameter of such model, hence requiring a Bayesian approach." We argue that while exchangeability, interpreted as symmetry of evidence, is a weak assumption, when combined with subjective expected utility theory, it implies also complete confidence that experiments are identical. When evidence is sparse, and there is little evidence of symmetry, this implication of de Finetti's hypotheses is not intuitive. This motivates our adoption of multiple-priors utility as the benchmark model of preference. We provide two alternative generalizations of the de Finetti Theorem for this framework. A model of updating is also provided. URI: http://hdl.handle.net/1807/27195 Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20100313 Rights: Authors who publish in Theoretical Economics will release their articles under the Creative Commons Attribution-NonCommercial license. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given. Appears in Collections: Volume 5, Number 3 (September 2010)

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