IDEAS home Printed from https://ideas.repec.org/p/cla/levrem/321307000000000776.html
   My bibliography  Save this paper

Bayesian Decision Theory and the Representation of Beliefs

Author

Listed:
  • Edi Karni

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Edi Karni, 2007. "Bayesian Decision Theory and the Representation of Beliefs," Levine's Bibliography 321307000000000776, UCLA Department of Economics.
    • Handle: RePEc:cla:levrem:321307000000000776
    as

    Download full text from publisher

    File URL: http://ratio.huji.ac.il/dp_files/dp444.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Karni, Edi & Schmeidler, David, 1993. "On the Uniqueness of Subjective Probabilities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 267-277, April.
    2. Karni, Edi, 2003. "On the Representation of Beliefs by Probabilities," Journal of Risk and Uncertainty, Springer, vol. 26(1), pages 17-38, January.
    3. Karni, Edi, 2007. "Foundations of Bayesian theory," Journal of Economic Theory, Elsevier, vol. 132(1), pages 167-188, January.
    4. Costis Skiadas, 1997. "Conditioning and Aggregation of Preferences," Econometrica, Econometric Society, vol. 65(2), pages 347-368, March.
    5. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    6. Karni, Edi, 1996. "Probabilities and Beliefs," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 249-262, November.
    7. Karni, Edi, 2006. "Subjective expected utility theory without states of the world," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 325-342, June.
    8. 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.
    9. Wakker, Peter, 1987. "Subjective probabilities for state dependent continuous utility," Mathematical Social Sciences, Elsevier, vol. 14(3), pages 289-298, December.
    10. Karni, Edi, 1993. "A Definition of Subjective Probabilities with State-Dependent Preferences," Econometrica, Econometric Society, vol. 61(1), pages 187-198, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edi Karni, 2008. "Agency theory: choice-based foundations of the parametrized distribution formulation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 337-351, September.
    2. Aurélien Baillon, 2008. "Eliciting Subjective Probabilities Through Exchangeable Events: An Advantage and a Limitation," Decision Analysis, INFORMS, vol. 5(2), pages 76-87, June.
    3. Sadowski, Philipp, 2008. "Conditional Preference for Flexibility: Eliciting Beliefs from Behavior," MPRA Paper 8614, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karni, Edi, 2007. "Foundations of Bayesian theory," Journal of Economic Theory, Elsevier, vol. 132(1), pages 167-188, January.
    2. Edi Karni, 2008. "Agency theory: choice-based foundations of the parametrized distribution formulation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 337-351, September.
    3. Edi Karni, 2009. "A Theory of Bayesian Decision Making," EIEF Working Papers Series 0904, Einaudi Institute for Economics and Finance (EIEF), revised May 2009.
    4. Brian Hill, 2009. "Living without state-independence of utilities," Theory and Decision, Springer, vol. 67(4), pages 405-432, October.
    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. Peter P. Wakker & Sylvia J. T. Jansen & Anne M. Stiggelbout, 2004. "Anchor Levels as a New Tool for the Theory and Measurement of Multiattribute Utility," Decision Analysis, INFORMS, vol. 1(4), pages 217-234, December.
    7. Edi Karni & Philippe Mongin, 2000. "On the Determination of Subjective Probability by Choices," Management Science, INFORMS, vol. 46(2), pages 233-248, February.
    8. Simon Grant & Edi Karni, 2005. "Why Does It Matter That Beliefs And Valuations Be Correctly Represented?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 917-934, August.
    9. Mongin, Philippe, 1998. "The paradox of the Bayesian experts and state-dependent utility theory," Journal of Mathematical Economics, Elsevier, vol. 29(3), pages 331-361, April.
    10. Samuel Drapeau & Asgar Jamneshan, 2014. "Conditional Preference Orders and their Numerical Representations," Papers 1410.5466, arXiv.org, revised Jan 2016.
    11. Christian Gollier, 2007. "Whom should we believe? Aggregation of heterogeneous beliefs," Journal of Risk and Uncertainty, Springer, vol. 35(2), pages 107-127, October.
    12. Drapeau, Samuel & Jamneshan, Asgar, 2016. "Conditional preference orders and their numerical representations," Journal of Mathematical Economics, Elsevier, vol. 63(C), pages 106-118.
    13. Enrico Diecidue & Peter Wakker & Marcel Zeelenberg, 2007. "Eliciting decision weights by adapting de Finetti’s betting-odds method to prospect theory," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 179-199, June.
    14. Skiadas, Costis, 1997. "Subjective Probability under Additive Aggregation of Conditional Preferences," Journal of Economic Theory, Elsevier, vol. 76(2), pages 242-271, October.
    15. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2007. "Probability and Uncertainty in Economic Modeling, Second Version," PIER Working Paper Archive 08-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jan 2008.
    16. Hill, Brian, 2010. "An additively separable representation in the Savage framework," Journal of Economic Theory, Elsevier, vol. 145(5), pages 2044-2054, September.
    17. Hill, Brian, 2009. "When is there state independence?," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1119-1134, May.
    18. Dumav, Martin & Khan, Urmee, 2018. "Moral hazard with non-additive uncertainty: When are actions implementable?," Economics Letters, Elsevier, vol. 171(C), pages 110-114.
    19. Edi Karni, 2011. "A theory of Bayesian decision making with action-dependent subjective probabilities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(1), pages 125-146, September.
    20. Martin Dumav, 2021. "Moral Hazard, Dynamic Incentives, and Ambiguous Perceptions," Papers 2110.15229, arXiv.org.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cla:levrem:321307000000000776. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David K. Levine (email available below). General contact details of provider: http://www.dklevine.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.