Bayesian statistical decision theory (Rev #2, changes)

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**Bayesian statistical decision theory** is a formal approach to making decisions under uncertainty. The big picture looks like this.

The **model** is at the heart of the framework. Typically it is based on scientific theory concerning some aspect of the real world. It is a stochastic model with some adjustable parameters which can be used to calculate the probability of observing particular outcomes.

The **prior** is a probability distribution which represents what assumed about the value of the parameters before the data is seen.

The **utility function**, or **loss function** evaluates the consequences of taking possible actions, given parameter values.

category: statistical methods, area of research