Updating Belief and Dynamic Consistency
摘要
Suppose you have acquired information in the form of an event, meaning “I know that the true state of the world lies in this subset but do not know which one in it is true.” Then do you update your subjective belief? In probability theory we normally follow the Bayes rule, but how does it have to be? Here we will see that Bayesian updating is a necessary requirement following from Dynamic Consistency.