Internal Seminar: "Reverse Bayesianism: Revising Beliefs in Light of Unforeseen Events", Christoph Becker (Visiting Researcher WBS)
Hosted by Mikhail Spektor
Speaker: Christoph Becker
Title: Reverse Bayesianism: Revising Beliefs in Light of Unforeseen Events Abstract: Bayesian updating is the dominant theory of learning. However, the theory is silent about how individuals react to events that were previously unforeseeable or unforeseen. We test if subjects update their beliefs according to reverse Bayesianism, under which the relative likelihoods of prior beliefs remain unchanged after an unforeseen event materializes. Across two experiments we find that participants do not systematically deviate from reverse Bayesianism. However, we do find well-known violations of Bayesian updating. Furthermore, decision makers vary in their ex-ante unawareness depending on the context.