It’s been a while since anyone said “killer app” without irony, so let me remind you that a killer app is software “so necessary or desirable that it proves the core value of some larger technology,” quoth Wikipedia. For example, most people didn’t have much use for the internet until the world wide web was populated with useful content and the first generation of browsers made it easy to access.
So what is the Bayesian killer app? That is, for people who don’t know much about Bayesian methods, what’s the application that demonstrates their core value? I have a nomination: Thompson sampling, also known as the Bayesian bandit strategy, which is the foundation of Bayesian A/B testing.
I’ve been writing and teaching about Bayesian methods for a while, and Thompson sampling is the destination that provides the shortest path from Bayes’s Theorem to a practical, useful method that is meaningfully better than the more familiar alternative, hypothesis testing in general and Student’s t test in particular.
So what does that path look like? Well, funny you should ask, because I presented my answer last November as a tutorial at PyData Global 2022, and the video has just been posted:
And if you like the tutorial, you’ll love the game: here are the instructions for a game I designed that uses dice to implement Thompson sampling.
This tutorial is a hands-on introduction to Bayesian Decision Analysis (BDA), which is a framework for using probability to guide decision-making under uncertainty. I start with Bayes’s Theorem, which is the foundation of Bayesian statistics, and work toward the Bayesian bandit strategy, which is used for A/B testing, medical tests, and related applications. For each step, I provide a Jupyter notebook where you can run Python code and work on exercises. In addition to the bandit strategy, I summarize two other applications of BDA, optimal bidding and deriving a decision rule. Finally, I suggest resources you can use to learn more.
- Problem statement: A/B testing, medical tests, and the Bayesian bandit problem
- Prerequisites and goals
- Bayes’s theorem and the five urn problem
- Using Pandas to represent a PMF
- Estimating proportions
- From belief to strategy
- Implementing and testing Thompson sampling
- More generally: two other examples of BDA
- Resources and next steps
For this tutorial, you should be familiar with Python at an intermediate level. We’ll use NumPy, SciPy, and Pandas, but I’ll explain what you need to know as we go. You should be familiar with basic probability, but you don’t need to know anything about Bayesian statistics. I provide Jupyter notebooks that run on Colab, so you don’t have to install anything or prepare ahead of time. But you should be familiar with Jupyter notebooks.