Introduction to Statistical Decision Theory, 1995, 875 pages, John Winsor Pratt,

Howard Raiffa, Robert Schlaifer, 0262161443, 9780262161442, MIT Press, 1995

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The Bayesian revolution in statistics—where statistics is integrated with decision making in areas
such as management, public policy, engineering, and clinical medicine—is here to stay.
Introduction to Statistical Decision Theory states the case and in a self-contained, comprehensive
way shows how the approach is operational and relevant for real-world decision making under
uncertainty.Starting with an extensive account of the foundations of decision theory, the authors
develop the intertwining concepts of subjective probability and utility. They then systematically and
comprehensively examine the Bernoulli, Poisson, and Normal (univariate and multivariate) data
generating processes. For each process they consider how prior judgments about the uncertain
parameters of the process are modified given the results of statistical sampling, and they
investigate typical decision problems in which the main sources of uncertainty are the population
parameters. They also discuss the value of sampling information and optimal sample sizes given
sampling costs and the economics of the terminal decision problems.Unlike most introductory texts
in statistics, Introduction to Statistical Decision Theory integrates statistical inference with decision
making and discusses real-world actions involving economic payoffs and risks. After developing the
rationale and demonstrating the power and relevance of the subjective, decision approach, the text
also examines and critiques the limitations of the objective, classical approach.

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