Bayesian decision theory and the representation of beliefs. Working Paper

Abstract In this paper, I present an axiomatic choice theory of Bayesian decision makers and define choice-based subjective probabilities that truly represent Bayesian decision makers' prior and posterior beliefs. I give an example that illustrates the potential consequences of ascribing to a decision maker subjective probabilities that do not represent his beliefs. I argue that no equivalent results may be obtained in theories that invoke Savage's (1954) idea of a state space