An Axiomatic Model of Non-Bayesian Updating

This paper models an agent in a three-period setting who does not update according to Bayes' Rule and who is self-aware and anticipates her updating behaviour when formulating plans. Gul and Pesendorfer's theory of temptation and self-control is a key building block. The main result is a representation theorem that generalizes (the dynamic version of) Anscombe-Aumann's theorem so that "both" the prior "and" the way in which it is updated are subjective. The model can accommodate updating biases analogous to those observed by psychologists. Copyright 2006 The Review of Economic Studies Limited.