Intro to Mathematical Economics
Bayesian Decision Theory is a statistical approach to decision-making under uncertainty, which uses Bayes' theorem to update the probability estimates for a hypothesis as more evidence becomes available. This theory helps decision-makers evaluate the expected outcomes of different choices by considering both the probabilities of various states of the world and the potential payoffs associated with each action. It emphasizes the importance of prior beliefs and how they can be adjusted in light of new information.
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