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Variational Bayes as a model of belief updating

Published on:

14 May 2024

Primary Category:

Theoretical Economics

Paper Authors:

Tomasz Strzalecki


Key Details

Shows link between variational Bayes and exponential updating rule

Objective function balances closeness to prior vs. evidence

Model misspecification maps to under/overweighting evidence

Uncertainty attitude maps to over/underweighting prior

AI generated summary

Variational Bayes as a model of belief updating

This paper shows how variational Bayesian methods can provide a foundation for modeling how people update beliefs in a non-Bayesian way. By modifying the variational Bayes objective function, the author derives a popular exponential belief updating rule used in behavioral economics. The paper explores attitudes toward uncertainty and model misspecification that map to parameters of this exponential rule.

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