The Bayesian Model of Conditional Preference and Trade Under Uncertainty

An implicit assumption, labeled experience stability, of standard models of conditional preference is discussed. A suggestive example is given to illustrate why choices may not be experience stable and a simple numerical representation of preferences not necessarily satisfying this assumption is examplified. The relevance of this assumption in resolving descriptive difficulties of economic models of trade under uncertainty is discussed. Keywords: Bayesian Inference, Conditional Preference, Speculative Trade.