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  • Cited by 3
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    This chapter has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Faulkner, Phil Feduzi, Alberto and Runde, Jochen 2017. Unknowns, Black Swans and the risk/uncertainty distinction. Cambridge Journal of Economics, Vol. 41, Issue. 5, p. 1279.

    Bradley, Richard and Steele, Katie 2015. Making Climate Decisions. Philosophy Compass, Vol. 10, Issue. 11, p. 799.

    Sahlin, Nils-Eric and Weirich, Paul 2014. Unsharp Sharpness. Theoria, Vol. 80, Issue. 1, p. 100.

  • Print publication year: 1988
  • Online publication date: June 2012

16 - Unreliable probabilities, risk taking, and decision making


The limitations of strict Bayesianism

A central part of Bayesianism is the doctrine that the decision maker's knowledge in a given situation can be represented by a subjective probability measure defined over the possible states of the world. This measure can be used to determine the expected utility for the agent of the various alternatives open to him. The basic decision rule is then that the alternative which has the maximal expected utility should be chosen.

A fundamental assumption for this strict form of Bayesianism is that the decision maker's knowledge can be represented by a unique probability measure. The adherents of this assumption have produced a variety of arguments in favor of it, the most famous being the so-called Dutch book arguments. A consequence of the assumption, in connection with the rule of maximizing expected utility, is that in two decision situations which are identical with respect to the probabilities assigned to the relevant states and the utilities of the various outcomes the decisions should be the same.

It seems to us, however, that it is possible to find decision situations which are identical in all the respects relevant to the strict Bayesian, but which nevertheless motivate different decisions. As an example to illustrate this point, consider Miss Julie who is invited to bet on the outcome of three different tennis matches.

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Decision, Probability and Utility
  • Online ISBN: 9780511609220
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