Bayesian Decision Theory and the Representation of Beliefs
AbstractIn 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.
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Bibliographic InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp444.
Length: 39 pages
Date of creation: Jan 2007
Date of revision:
Other versions of this item:
- Edi Karni, 2007. "Bayesian Decision Theory and the Representation of Beliefs," Levine's Bibliography 321307000000000776, UCLA Department of Economics.
- NEP-ALL-2007-01-23 (All new papers)
- NEP-HPE-2007-01-23 (History & Philosophy of Economics)
- NEP-UPT-2007-01-23 (Utility Models & Prospect Theory)
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- Karni, Edi & Schmeidler, David, 1993.
"On the Uniqueness of Subjective Probabilities,"
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Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research
15-80, Wharton School Rodney L. White Center for Financial Research.
- Karni, Edi, 2006.
"Subjective expected utility theory without states of the world,"
Journal of Mathematical Economics,
Elsevier, vol. 42(3), pages 325-342, June.
- Edi Karni, 2005. "Subjective Expected Utility Theory without States of the World," Economics Working Paper Archive 523, The Johns Hopkins University,Department of Economics.
- Nau, Robert F, 1995. "Coherent Decision Analysis with Inseparable Probabilities and Utilities," Journal of Risk and Uncertainty, Springer, Springer, vol. 10(1), pages 71-91, January.
- Karni, Edi, 1996. "Probabilities and Beliefs," Journal of Risk and Uncertainty, Springer, Springer, vol. 13(3), pages 249-62, November.
- Karni, Edi, 1993. "A Definition of Subjective Probabilities with State-Dependent Preferences," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 187-98, January.
- Edi Karni, 2005.
"Foundations of Bayesian Theory,"
Economics Working Paper Archive
524, The Johns Hopkins University,Department of Economics.
- Wakker, Peter, 1987. "Subjective probabilities for state dependent continuous utility," Mathematical Social Sciences, Elsevier, Elsevier, vol. 14(3), pages 289-298, December.
- Karni, Edi, 2003. " On the Representation of Beliefs by Probabilities," Journal of Risk and Uncertainty, Springer, Springer, vol. 26(1), pages 17-38, January.
- Costis Skiadas, 1997. "Conditioning and Aggregation of Preferences," Econometrica, Econometric Society, Econometric Society, vol. 65(2), pages 347-368, March.
- Edi Karni, 2008. "Agency theory: choice-based foundations of the parametrized distribution formulation," Economic Theory, Springer, Springer, vol. 36(3), pages 337-351, September.
- Sadowski, Philipp, 2008. "Conditional Preference for Flexibility: Eliciting Beliefs from Behavior," MPRA Paper 8614, University Library of Munich, Germany.
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