Bayesian decision theory

A simple toy problem

Conference paper (2016)

Authors

H.R.N. van Erp Safety and Security Science - TPM
R.O. Linger Safety and Security Science - TPM
P.H.A.J.M. van Gelder Safety and Security Science - TPM
Research Group
Safety and Security Science (TPM) (TU Delft)
Copyright: © 2016 H.R.N. van Erp, R.O. Linger, P.H.A.J.M. van Gelder
DOI
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https://doi.org/10.1063/1.4959058
More Info
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Published Date

2016

Language

English

Reuse Rights

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Faculty

Technology, Policy and Management

Department

Values Technology and Innovation

Research Group

Safety and Security Science

Abstract

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.

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