On the Foundations of Decision Theory

Ken Binmore ()
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Ken Binmore: Bristol University

Homo Oeconomicus: Journal of Behavioral and Institutional Economics, 2017, vol. 34, issue 4, No 2, 259-273

Abstract: Abstract Bayesian decision theory was invented by Leonard Savage, who is on record as saying that it would be “preposterous” and “utterly ridiculous” to apply his theory except in a small world. But modern Bayesians proceed as though Savage’s theory is always the rational way to make choices in all circumstances. What is a small world? Why did Savage restrict his theory to small worlds? Where did Savage think priors come from? What are the implications for behavioral applications? How could Savage’s theory be generalized to apply to at least some large worlds? This paper offers some partial answers to such questions.

Keywords: Bayesian decision theory; Bayesianism; Leonard Savage; Small worlds; Ellsberg paradox; Imprecise probability (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s41412-017-0056-1

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