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Bayesian approach

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to statistical problems

An approach based on the assumption that to any parameter in a statistical problem there can be assigned a definite probability distribution. Any general statistical decision problem is determined by the following elements: by a space of (potential) samples , by a space of values of the unknown parameter , by a family of probability distributions on , by a space of decisions and by a function , which characterizes the losses caused by accepting the decision when the true value of the parameter is . The objective of decision making is to find in a certain sense an optimal rule (decision function) , assigning to each result of an observation the decision . In the Bayesian approach, when it is assumed that the unknown parameter is a random variable with a given (a priori) distribution on the best decision function (Bayesian decision function) is defined as the function for which the minimum expected loss , where

and

is attained. Thus,

In searching for the Bayesian decision function , the following remark is useful. Let , , where and are certain -finite measures. One then finds, assuming that the order of integration may be changed,

It is seen from the above that for a given is that value of for which

is attained, or, what is equivalent, for which

is attained, where

But, according to the Bayes formula

Thus, for a given , is that value of for which the conditional average loss attains a minimum.

Example. (The Bayesian approach applied to the case of distinguishing between two simple hypotheses.) Let , , , ; , , . If the solution is identified with the acceptance of the hypothesis : , it is natural to assume that , . Then

implies that is attained for the function

The advantage of the Bayesian approach consists in the fact that, unlike the losses , the expected losses are numbers which are dependent on the unknown parameter , and, consequently, it is known that solutions for which

and which are, if not optimal, at least -optimal , are certain to exist. The disadvantage of the Bayesian approach is the necessity of postulating both the existence of an a priori distribution of the unknown parameter and its precise form (the latter disadvantage may be overcome to a certain extent by adopting an empirical Bayesian approach, cf. Bayesian approach, empirical).

References

[1] A. Wald, "Statistical decision functions" , Wiley (1950)
[2] M.H. de Groot, "Optimal statistical decisions" , McGraw-Hill (1970)
How to Cite This Entry:
Bayesian approach. Encyclopedia of Mathematics. URL: http://www.encyclopediaofmath.org/index.php?title=Bayesian_approach&oldid=29437
This article was adapted from an original article by A.N. Shiryaev (originator), which appeared in Encyclopedia of Mathematics - ISBN 1402006098. See original article