Bayesian Decision Theory And Its Application In Economics

Inductive reasoning and inductive methods are widely used in people's way of thinking and scientific research. Probabilistic inductive logic, as the mainstream of modern inductive logic, has become the hot topic of logical research. The three important schools of probabilistic inductive logic are the Logic Bayesian, Subjective Bayesian and Empiricism School. Described in detail in this Bayesian decision theory is a subjective Bayesian which puts theoretical knowledge into practice in decision-making.In chapter 1, the author starts with the concept and origin of probabilistic inductive logic, and then the subjective Bayesian decision theory in order to make clear probabilistic inductive logic and especially Bayesian decision theory.In chapter 2, the author briefly introduces the concept, the basic elements and the classification of decision-making, and a large number of examples are cited to explain the theory. Bayesian decision theory plays an important role in both the probability and utility. E. P. Ramsey, B. de Finetti, L. J. Savage and R. Jeffrey make different contributions to the theory. The author compares their methods and furthermore, puts forward her own points of views.In chapter 3, an actual case of economic decision is cited in order to clearly illustrate that Bayesian Theory is used to solve problems in the following three steps: First, make an assumption of possibility under different circumstances on the basis of statistics or experience. Second, substitute posteriori possibility with priori possibility. Third, analyze the expected value.