A Testable Theory of Imperfect Perception

We provide a characterisation of choice behaviour generated by a Bayesian expected utility maximiser. The observable signature of this standard model is the impossibility of raising utility by switching wholesale from one action to another. We provide applications to robustness, to the recovery of u...

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Bibliographic Details
Published in:The Economic journal (London) 2015-02, Vol.125 (582), p.184-202
Main Authors: Caplin, Andrew, Martin, Daniel
Format: Article
Language:English
Subjects:
Bayesian analysis
Bayesian method
Economic models
Economic recovery
Economics and Finance
Expected utility
Humanities and Social Sciences
Studies
Utility functions
Utility theory
Wholesale prices
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Summary:We provide a characterisation of choice behaviour generated by a Bayesian expected utility maximiser. The observable signature of this standard model is the impossibility of raising utility by switching wholesale from one action to another. We provide applications to robustness, to the recovery of utility from choice data and to model classification.
ISSN:0013-0133
1468-0297
DOI:10.1111/ecoj.12130