Citation:
Karni, Edi . “Bayesian Decision Theory And The Representation Of Beliefs”. Discussion Papers 2007. Web.
Abstract:
In this paper, I present a Bayesian decision theory and define choice-based subjective probabilities that faithfully represent Bayesian decision makers prior and posterior beliefs regarding the likelihood of the possible effects contingent on his actions. I argue that no equivalent results can be obtained in Savage s (1954) subjective expected utility theory and give an example illustrating the potential harm caused by ascribing to a decision maker subjective probabilities that do not represent his beliefs.