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On decision-theoretic justifications for Bayesian hypothesis testing through credible sets

Abstract

In Bayesian statistics the precise point-null hypothesis θ=θ0\theta=\theta_0 can be tested by checking whether θ0\theta_0 is contained in a credible set. This permits testing of θ=θ0\theta=\theta_0 without having to put prior probabilities on the hypotheses. While such inversions of credible sets have a long history in Bayesian inference, they have been criticised for lacking decision-theoretic justification. We argue that there are such justifications, by showing that inversion of central credible intervals can be motivated by studying a three-decision problem with directional conclusions, that the inversion of credible bounds are justified by a weighted 0-1 loss and by reviewing justifications for inverting HPD sets.

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