That would be missing the point.
Would it? My interest is in constructing a framework which provides useful, insightful, and reasonably accurate models for actual human decision-making. The vNM theorem is quite useless in this respect -- I don't know what my (or other people's) utility function is, I cannot calculate or even estimate it, a great deal of important choices can be expressed as a set of lotteries only in very awkward ways, etc. And this is even besides the fact that empirical human preferences tend to not be coherent and they change with time.
Risk aversion is an easily observable fact. Every day in financial markets people pay very large amounts of money in order to reduce their risk (for the same expected return). If you think they are all wrong, by all means, go and become rich off these misguided fools.
But your different beliefs about the coins don't need to show up in your probability for a single coinflip.
Why not? As I said, I want a richer way to talk about probabilities, more complex than taking them as simple scalars. Do you think it's a bad idea? Does St.Bayes frown upon it?
As I said, I want a richer way to talk about probabilities, more complex than taking them as simple scalars. Do you think it's a bad idea?
That's right, I think it's a bad idea: it sounds like what you actually want is a richer way to talk about your beliefs about Coin 2, but you can do that using standard probability theory, without needing to invent a new field of math from scratch.
Suppose you think Coin 2 is biased and lands heads some unknown fraction _r_ of the time. Your uncertainty about the parameter _r_ will be represented by a probability distr...
(Warning: completely obvious reasoning that I'm only posting because I haven't seen it spelled out anywhere.)
Some people say, expanding on an idea of de Finetti, that Bayesian rational agents should offer two-sided bets based on their beliefs. For example, if you think a coin is fair, you should be willing to offer anyone a 50/50 bet on heads (or tails) for a penny. Jack called it the "will-to-wager assumption" here and I don't know a better name.
In its simplest form the assumption is false, even for perfectly rational agents in a perfectly simple world. For example, I can give you my favorite fair coin so you can flip it and take a peek at the result. Then, even though I still believe the coin is fair, I'd be a fool to offer both sides of the wager to you, because you'd just take whichever side benefits you (since you've seen the result and I haven't). That objection is not just academic: using your sincere beliefs to bet money against better informed people is a bad idea in real world markets as well.
Then the question arises, how can we fix the assumption so it still says something sensible about rationality? I think the right fix should go something like this. If you flip a coin and peek at the result, then offer me a bet at 90:10 odds that the coin came up heads, I must either accept the bet or update toward believing that the coin indeed came up heads, with at least these odds. I don't get to keep my 50:50 beliefs about the coin and refuse the bet at the same time. More generally, a Bayesian rational agent offered a bet (by another agent who might have more information) must either accept the bet or update their beliefs so the bet becomes unprofitable. The old obligation about offering two-sided bets on all your beliefs is obsolete, use this one from now on. It should also come in handy in living room Bayesian scuffles, throwing some money on the table and saying "bet or update!" has a nice ring to it.
What do you think?