The posterior PDF of the model parameter is obtained using
Bayesian updating, implemented using the MCMC algorithms.
For this special case, the sequential
Bayesian updating process on nearest neighbors starts from nearest neighbor [i.sub.1]([u.sub.1]) and ends at nearest neighbor [i.sub.m]([u.sub.m]) in a Markov-type neighborhood around the location [u.sub.0] being estimated (see Figure 1(b) as an example).
When it is assumed that the aftermarket trading price follows a
Bayesian updating process, this study shows that underpricing has both positive and negative impacts on the entrepreneur's final wealth.
We choose classical
Bayesian updating because (1) the resulting q(k) is the vector of conditional probabilities for the buyer type given the reporting strategy [??], and (2) q(k) is nonlinear in the prior rating q (k-1), which results in nontrivial reporting strategies even under linear preferences, as we show later.
When
Bayesian updating was applied without the uncertainty factor, most of the weight shifted from three modes for [q.sub.net] to predominantly two modes for each net type (Fig.
To facilitate the
Bayesian updating, this function will be replaced by a family of functions [F.sub.i](y|[THETA] = [[theta].sub.k]) (k = 1, 2, ..., m), each having equal epistemic weight 1/m (Sec 4.3).
Employers are assumed to use
Bayesian updating when forming beliefs about the ability of workers.
If Yolanda, for example, behaves according to this view of adaptation, then she will not follow the Cournot reaction curve or sequential
Bayesian updating. On the contrary, if she and Xavier selected outcome 2 in the first period, she will see that she could be better off by moving to row 3 or row 4, and that will be sufficient.
The reputation of i for being the good type is denoted by [p.sup.i.sub.t+1], stemming from
Bayesian updating of [p.sup.i.sub.t] after observing outputs in t.
The probability distribution function (pdf) given as g([center dot]) would evidence
Bayesian updating if present.
[1996]: '
Bayesian Updating', Aristotelian Society Supplementary Volume, 70, forthcoming.
The CM does not have, therefore, a
Bayesian updating cost.
