Template-Type: ReDIF-Paper 1.0
Author-Name: Burkhard C. Schipper
Author-Name-First: Burkhard C.
Author-Name-Last: Schipper
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Predicting the Unpredictable under Subjective Expected Utility
Abstract: We consider a decision maker who is unaware of objects to be sampled and thus cannot form beliefs about the occurrence of particular objects. Ex ante she can form beliefs about the occurrence of novelty and the frequencies of yet to be known objects. Conditional on any sampled objects, she can also form beliefs about the next object being novel or being one of the previously sampled objects. We characterize behaviorally such beliefs under subjective expected utility. In doing so, we relate "reverse" Bayesianism, a central property in the literature on decision making under growing awareness, with exchangeable random partitions, the central property in the literature on the discovery of species problem and mutations in statistics, combinatorial probability theory, and population genetics. Partition exchangeable beliefs do not necessarily satisfy "reverse" Bayesianism. Yet, the most prominent models of exchangeable random partitions, the model by De Morgan (1838), the one parameter model of Ewens (1972), and the two parameter model of Pitman (1995) and Zabell (1997), do satisfy "reverse" Bayesianism.
Length: 34
File-URL: https://repec.dss.ucdavis.edu/files/9fhb7pzl9g3piqs8oqm2hm9mh3o5/prediction9.pdf
File-Format: application/pdf
Number: 362
Classification-JEL: D83
KeyWords: Awareness of unawareness, unknown unknowns, exchangeable random partitions, "reverse" Bayesianism, discovery of species problem, discovery, novelty, inductive reasoning
Creation-Date: 20240302
Handle: RePEc:cda:wpaper:362