<p>Today's clip is from <a rel="noopener noreferrer nofollow" href="https://learnbayesstats.com/episode/152-a-bayesian-decision-theory-workflow-with-daniel-saunders" target="_blank">Episode 152</a> of the podcast, with Daniel Saunders. <br /><br />In this conversation, Daniel Saunders explains how to incorporate risk aversion into Bayesian price optimization. The key insight is that uncertainty around expected profit is asymmetric across price points, low prices yield more predictable (if modest) returns, while high prices introduce much wider uncertainty. Rather than simply maximizing expected profit, you can pass profit through an exponential utility function that models diminishing returns, a well-established idea from economics. <br /><br />This adds an adjustable risk aversion parameter to the optimization: as risk aversion increases, the model shifts toward more conservative price recommendations, trading off potentially large but uncertain gains for outcomes with tighter, more reliable distributions.<br /><br />Get the full discussion <a rel="noopener noreferrer nofollow" href="https://learnbayesstats.com/episode/152-a-bayesian-decision-theory-workflow-with-daniel-saunders" target="_blank">here</a><br /><br />• Join this channel to get access to perks:<br /><a rel="noopener noreferrer nofollow" href="https://www.patreon.com/c/learnbayesstats" target="_blank">https://www.patreon.com/c/learnbayesstats</a><br /><br />• Intro to Bayes Course (first 2 lessons free): <a rel="noopener noreferrer nofollow" href="https://topmate.io/alex_andorra/503302" target="_blank">https://topmate.io/alex_andorra/503302</a><br />• Advanced Regression Course (first 2 lessons free): <a rel="noopener noreferrer nofollow" href="https://topmate.io/alex_andorra/1011122" target="_blank">https://topmate.io/alex_andorra/1011122</a><br /><br />Our theme music is « Good Bayesian », by Baba Brinkman (feat MC Lars and Mega Ran). Check out his awesome work at <a rel="noopener noreferrer nofollow" href="https://bababrinkman.com/" target="_blank">https://bababrinkman.com/</a> !</p>