It is widely held that Bayesian decision theory is the final word on how
a rational person should make decisions. However, Leonard Savage--the
inventor of Bayesian decision theory--argued that it would be ridiculous
to use his theory outside the kind of small world in which it is always
possible to "look before you leap." If taken seriously, this view makes
Bayesian decision theory inappropriate for the large worlds of
scientific discovery and macroeconomic enterprise. When is it correct to
use Bayesian decision theory--and when does it need to be modified?
Using a minimum of mathematics, Rational Decisions clearly explains
the foundations of Bayesian decision theory and shows why Savage
restricted the theory's application to small worlds.
The book is a wide-ranging exploration of standard theories of choice
and belief under risk and uncertainty. Ken Binmore discusses the various
philosophical attitudes related to the nature of probability and offers
resolutions to paradoxes believed to hinder further progress. In arguing
that the Bayesian approach to knowledge is inadequate in a large world,
Binmore proposes an extension to Bayesian decision theory--allowing the
idea of a mixed strategy in game theory to be expanded to a larger set
of what Binmore refers to as "muddled" strategies.
Written by one of the world's leading game theorists, Rational
Decisions is the touchstone for anyone needing a concise, accessible,
and expert view on Bayesian decision making.
