Bayesian decision theory

Bayesian decision theory: A simple toy problem

van Erp, H.R.N. (TU Delft Safety and Security Science)
Linger, R.O. (TU Delft Safety and Security Science)
van Gelder, P.H.A.J.M. (TU Delft Safety and Security Science)

2016

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.

http://resolver.tudelft.nl/uuid:85f27cfb-b120-41cd-9bf5-72f1eafbda71

https://doi.org/10.1063/1.4959058

American Institute of Physics

9780735414150

Proceedings 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, 1757

35th International Workshop on Bayesian Inference and Maximum Entropy Methods in Science and Engineering, 2015-07-19 → 2015-07-24, Potsdam, United States

Institutional Repository

conference paper

© 2016 H.R.N. van Erp, R.O. Linger, P.H.A.J.M. van Gelder