Volume 4 • Issue 1 | March 2020
On the Calculus of Subjective Probability in Behavioral Economics
Hung T. Nguyen
Bayesian Probability
Belief Functions
Choquet Capacity
Coarse Data
Frequentist Probability
Fuzzy Sets
Granularity
Idempotent Analysis
Linguistic Variables
Possibility Distributions
Possibility Measures
Random Sets
Subjective Probability.
Abstract:
In elaborating upon the recent thought-provoking paper “Subjective probability in behavioral economics and finance: A radical reformulation" by H. Joel Jeffrey and Anthony O. Putman (2015), we proceed to specify the calculus of their “probability (uncertainty) appraisals" as possibility measures, i.e., the “radical” reformulation of the usual calculus of subjective probabilities is that of idempotent uncertainty. With possibility measures as quantitative uncertainty for subjective probabilities, we discuss the necessary mariage of possibility measures and Kolmogorov probability measures in a new Bayesian analysis for economic applications.
JEL classification: C10, C11
MSC2020 classification: 60A05, 62C10