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Book Chapter10.1017/cbo9780511616372.003

Bayesian Tools

Christophe Chamley-2003-11-24-Cambridge University Press eBooks
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TL;DRAbstract

The Bayesian framework is introduced. The main tools for the models in this book are the binary modelwith two states of nature and the Gaussian model with a normal distribution of information. The correspondence between private information and private beliefs is discussed. Because rational beliefs will often be martingales, the martingale convergence theorem will be used repeatedly. Its mechanism is described intuitively.

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The Bayesian framework is introduced. The main tools for the models in this book are the binary modelwith two states of nature and the Gaussian model with a normal distribution of information. The correspondence between private information and private beliefs is discussed. Because rational beliefs will often be martingales, the martingale convergence theorem will be used repeatedly. Its mechanism is described intuitively.

Keywords

Bayesian probabilityMartingale (probability theory)Mathematical economicsGaussianConvergence (economics)MathematicsComputer sciencePrivate information retrieval

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