David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
Learn more about PhilPapers
We provide a discipline for beliefs formation through a model of subjective beliefs, in which agents hold incorrect but strategic beliefs. More precisely, we consider beliefs as a strategic variable that agents can manipulate to maximize their utility from trade. Our framework is therefore an imperfect competition framework, and the underlying concept is the concept of Nash equilibrium. We find that a strategic behavior leads to beliefs subjectivity and heterogeneity. Optimism (resp. overconfidence) as well as pessimism (resp. doubt) both emerge as optimal beliefs. Furthermore, we obtain a positive correlation between pessimism (resp. doubt) and risk-tolerance. The consensus belief is pessimistic and, as a consequence, the risk premium is higher than in a standard setting. Our model is embedded in a standard financial markets equilibrium problem and may be applied to several other situations in which agents have to choose the optimal exposure to a risk (choice of an optimal retention rate for an insurance company, choice of the optimal proportion of equity to retain for an entrepreneur and for a given project).
|Keywords||No keywords specified (fix it)|
No categories specified
(categorize this paper)
Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
|Through your library||
References found in this work BETA
No references found.
Citations of this work BETA
No citations found.
Similar books and articles
Ronald Fagin (1994). A Quantitative Analysis of Modal Logic. Journal of Symbolic Logic 59 (1):209-252.
Kelly A. Phipps (2012). Spirituality and Strategic Leadership: The Influence of Spiritual Beliefs on Strategic Decision Making. [REVIEW] Journal of Business Ethics 106 (2):177-189.
Elyès Jouini & Clotilde Napp (2012). Behavioral Biases and the Representative Agent. Theory and Decision 73 (1):97-123.
Andrés Perea (2007). A One-Person Doxastic Characterization of Nash Strategies. Synthese 158 (2):251 - 271.
Cristina Bicchieri (1988). Strategic Behavior and Counterfactuals. Synthese 76 (1):135 - 169.
John W. Schiemann, Bizarre Beliefs and Rational Choices: A Behavioral Approach to Analytic Narratives.
Hans Van Ditmarsch & Willem Labuschagne (2007). My Beliefs About Your Beliefs: A Case Study in Theory of Mind and Epistemic Logic. Synthese 155 (2):191 - 209.
Added to index2009-01-28
Total downloads2 ( #412,272 of 1,692,589 )
Recent downloads (6 months)1 ( #181,202 of 1,692,589 )
How can I increase my downloads?