Title: An Axiomatic Model and Test of Belief Updating: Bayes, Grether (1980), and Preservation of MLRP

Speaker: Kenneth Chan, Assistant Professor, Peking University HSBC Business School

Host: Xizhi Lin, Assistant Professor, Antai College of Economics and Management, Shanghai Jiao Tong University

Time: 14:00–15:30, Wednesday, November 18, 2026

Venue: Room A503, Antai College of Economics and Management, Xuhui Campus, Shanghai Jiao Tong University

Brief introduction of the content: 

This paper presents an axiomatic characterization of Bayes' rule and the Grether (1980) updating rule that is centered around the preservation of the Monotone Likelihood Ratio Property (MLRP). I show that Bayesian updating can be characterized by the preservation of MLRP from signals and the martingale property, while the Grether (1980) model is characterized by the preservation of MLRP from both signals and priors. This framework allows us to identify a class of non-Bayesian updating rules where we can obtain useful comparative statics across different signal realizations and prior beliefs in canonical belief updating problems. I also conducted an experiment to test the axioms that can be used to characterize Bayes' rule to identify why people are non-Bayesian. I find that subjects broadly comply with axioms about the preservation of MLRP, providing validation for the widely used Grether (1980) model.

Speaker's profile:

Kenneth is an Assistant Professor at Peking University HSBC Business School. He is a behavioral and experimental economist with an interest in belief updating, information economics, and health economics.

Welcome all!