Bayesian Decision Theory and the Representation of Beliefs

Edi Karni

Discussion Paper Series from Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem

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.

New Economics Papers: this item is included in nep-hpe and nep-upt
Date: 2007-01
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Working Paper: Bayesian Decision Theory and the Representation of Beliefs (2007)
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