Flat priors vs. ignorance priors in the analysis of the AR(1) model

The paper compares, by a Monte-Carlo study based on an AR(1) model, the performance of the flat prior and the ignorance prior suggested by Phillips. It argues that the ignorance prior gives heavy weight to values of the autoregressive parameter |rho higher than 1, and hence distorts the sample evidence as summarized in the likelihood function. It yields bimodal posterior distributions, with the second mode at |rho higher than 1, even when the true value of |rho is substantially less than 1.