Bayesian Approach

Named after the 18th-century English cleric Thomas Bayes, the Bayesian approach refers to a distinctive framework for decision making. Accepting the dictum that “probability is the guide to life,” the Bayesian approach provides a model for rational choice in which the expected utility of an action is determined in relation to a person's notions of the probabilities and utilities associated with the potential outcomes of the action under consideration. In considering alternative courses of action, the Bayesian principle is to choose an action with the greatest expected utility. The Bayesian approach has been widely influential in the development of rational choice theory and has been used in the study of rational choice in diverse disciplines, including management science and economics. Three elements central to the ...