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Modeling biased information seeking with second order probability distributions

Gernot D. Kleiter (2015)


Updating probabilities by information from only one hypothesis and thereby ignoring alternative hypotheses, is not only biased but leads to progressively imprecise conclusions. In psychology this phenomenon was studied in experiments with the “pseudodiagnosticity task”. In probability logic the phenomenon that additional premises increase the imprecision of a conclusion is known as “degradation”. The present contribution investigates degradation in the context of second order probability distributions....

Pricing rules under asymmetric information

Shigeyoshi Ogawa, Monique Pontier (2007)

ESAIM: Probability and Statistics

We consider an extension of the Kyle and Back's model [Back, Rev. Finance Stud.5 (1992) 387–409; Kyle, Econometrica35 (1985) 1315–1335], meaning a model for the market with a continuous time risky asset and asymmetrical information. There are three financial agents: the market maker, an insider trader (who knows a random variable V which will be revealed at final time) and a non informed agent. Here we assume that the non informed agent is strategic, namely he/she uses a utility function to...

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