Bayes’ theorem refers to a probabilistic framework for updating beliefs in light of new evidence. Initially derived from the work of the Reverend (and statistician and philosopher) Thomas Bayes, published in 1763, this theorem provides a formal method for revising prior probabilities based on observed data, thus allowing for the incorporation of new information.
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The concept of bounded rationalityThe concept of bounded rationalityThe concept of bounded rationality refers to the idea that human rationality is constrained by (1) available information, (2) cognitive / information processing limitations, and... More refers to the idea that human rationality is constrained by (1) available information, (2) cognitive / information processing limitations, and… More refers to the idea that human rationality is constrained by (1) available information, (2) cognitive / information processing limitations, and (3) available time. The term
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Coherence versus CorrespondenceCoherence versus Correspondence In decision science, the terms "coherence" and "correspondence" refer to two different criteria for evaluating the quality or correctness of, beliefs, judgments,... More In decision scienceThe term behavioral decision sciences refers to an interdisciplinary field that combines psychology, economics, statistics, computer science, and management science to understand how individuals, groups,... More, the terms “coherence” and “correspondence” refer to two different criteria for evaluating the quality or correctness of, beliefs, judgments, or decisions. “Coherence” relates to their internal consistency. A coherent judgment is one that logically aligns with a person’s other beliefs or with accepted rules of logic and probability theory.
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For a more detailed, historical consideration of expected valueFor a more detailed, historical consideration of expected value, with more complicated detailed, complex examples of how to calculate it, see the Casino Cognition Substack... More, with more complicated detailed, complex examples of how to calculate it, see the Casino Cognition Substack essay from January 2025 here. Expected value or EV is the average return one can expect to get from a repeated decision, such as from a gamble, if it is
Decision scientists often distinguish between normative and descriptive models of decision making, and less often add the additional distinction between normative and prescriptive modelsDecision scientists often distinguish between normative and descriptive models of decision making, and less often add the additional distinction between normative and prescriptive modelsDecision scientists often distinguish between normative and descriptive models of decision making, and less often add the additional distinction between normative and prescriptive models. Normative... More. Normative… More. Normative Models Normative models are models
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