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.