Bayesian Decision Theory Made Ridiculously Simple · Statistics @ Home


So how do we determine the "best" decision? This requires that we first define some notion of what we want (what are we trying to do?). The formal object that we use to do this goes by many names depending on the field: I will refer to it as a Loss function (\(\mathcal{L}\)) but the same general concept may be alternatively called a cost function, a utility function, an acquisition function, or any number of different things. The crucial idea is that this is a function that allows us to quantify how bad/good a given decision (\(a\)) is given some information (\(\theta\)). What does it mean to quantify?