Bayesian decision theory

A simple toy problem

Conference Paper (2016)
Author(s)

H. R.Noel van Erp (TU Delft - Safety and Security Science)

R.O. Linger (TU Delft - Safety and Security Science)

Pieter H.A.J.M. van Gelder (TU Delft - Safety and Security Science)

Copyright
© 2016 H.R.N. van Erp, R.O. Linger, P.H.A.J.M. van Gelder
DOI related publication
https://doi.org/10.1063/1.4959058
More Info
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Publication Year
2016
Language
English
Copyright
© 2016 H.R.N. van Erp, R.O. Linger, P.H.A.J.M. van Gelder
Volume number
1757
ISBN (electronic)
9780735414150
Reuse Rights

Other than for strictly personal use, it is not permitted to download, forward or distribute the text or part of it, without the consent of the author(s) and/or copyright holder(s), unless the work is under an open content license such as Creative Commons.

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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