Optimal selection from distributions with unknown parameters: Robustness of Bayesian models |
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Authors: | Alfred Müller |
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Institution: | (1) Institut für Wirtschaftstheorie und Operations Research, Universität Karlsruhe, Kaiserstr. 12, 76128 Karlsruhe, Germany |
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Abstract: | We consider the problem of making one choice from a known number of i.i.d. alternatives. It is assumed that the distribution of the alternatives has some unknown parameter. We follow a Bayesian approach to maximize the discounted expected value of the chosen alternative minus the costs for the observations. For the case of gamma and normal distribution we investigate the sensitivity of the solution with respect to the prior distributions. Our main objective is to derive monotonicity and continuity results for the dependence on parameters of the prior distributions. Thus we prove some sort of Bayesian robustness of the model. |
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Keywords: | Bayesian Dynamic Programming Stochastic Orders Kantorovich metric Optimal Selection Sensitivity Analysis Monotonicity Bayesian Robustness |
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