Bayesian decision theory: A simple toy problem

H. R N Van Erp*, R. O. Linger, P. H A J M Van Gelder

*Corresponding author for this work

Research output: Chapter in Book/Conference proceedings/Edited volumeConference contributionScientificpeer-review

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Abstract

We give here a comparison of the expected outcome theory, the expected utility theory, and the Bayesian decision theory, by way of a simple numerical toy problem in which we look at the investment willingness to avert a high impact low probability event. It will be found that for this toy problem the modeled investment willingness under the Bayesian decision theory is minimally three times higher compared to the investment willingness under either the expected outcome or the expected utility theories, where it is noted that the estimates of the latter two theories seem to be unrealistically low.

Original languageEnglish
Title of host publicationProceedings of Bayesian Inference and Maximum Entropy Methods in Science and Engineering: 35th International Workshop on Bayesian Inference and Maximum Entropy Methods in Science and Engineering, MaxEnt 2015
PublisherAmerican Institute of Physics
Number of pages7
Volume1757
ISBN (Electronic)9780735414150
DOIs
Publication statusPublished - 2016
Event35th International Workshop on Bayesian Inference and Maximum Entropy Methods in Science and Engineering - Potsdam, United States
Duration: 19 Jul 201524 Jul 2015
Conference number: 35

Conference

Conference35th International Workshop on Bayesian Inference and Maximum Entropy Methods in Science and Engineering
Abbreviated titleMaxEnt 2015
Country/TerritoryUnited States
CityPotsdam
Period19/07/1524/07/15

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