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A Theory of Bayesian Decision Making

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  • Edi Karni

    (Johns Hopkins University)

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    Abstract

    This paper presents a complete, choice-based, axiomatic Bayesian decision theory. It introduces a new choice set consisting of information-contingent plans for choosing actions and bets and subjective expected utility model with effect-dependent utility functions and action-dependent subjective probabilities which, in conjunction with the updating of the probabilities using Bayes’ rule, gives rise to a unique prior and a set of action-dependent posterior probabilities representing the decision maker’s prior and posterior beliefs.

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    File URL: http://www.eief.it/files/2012/09/wp-04-a-theory-of-bayesian-decision-making.pdf
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    Bibliographic Info

    Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 0904.

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    Length: 38 pages
    Date of creation: 2009
    Date of revision: May 2009
    Handle: RePEc:eie:wpaper:0904

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Karni, Edi, 1996. "Probabilities and Beliefs," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 249-62, November.
    2. Machina Mark J. & Schmeidler David, 1995. "Bayes without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice," Journal of Economic Theory, Elsevier, vol. 67(1), pages 106-128, October.
    3. Wakker, Peter, 1987. "Subjective probabilities for state dependent continuous utility," Mathematical Social Sciences, Elsevier, vol. 14(3), pages 289-298, December.
    4. Nau, Robert F, 1995. "Coherent Decision Analysis with Inseparable Probabilities and Utilities," Journal of Risk and Uncertainty, Springer, vol. 10(1), pages 71-91, January.
    5. Karni, Edi, 2006. "Subjective expected utility theory without states of the world," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 325-342, June.
    6. Karni, E. & Schmeidler, D., 1991. "On the Uniqueness of Subjective Probabilities," Papers 1-92, Tel Aviv - the Sackler Institute of Economic Studies.
    7. Brian, HILL, 2007. "An additively separable representation in the Savage framework," Les Cahiers de Recherche 882, HEC Paris.
    8. Edi Karni, 2008. "On Optimal Insurance in the Presence of Moral Hazard*," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 33(1), pages 1-18, June.
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