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Using Bayes' Rule to Update an Event's Probabilities Based on the Outcomes of Partially Similar Events

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  • Robert F. Bordley

    (General Motors Technical Center, Warren, Michigan 48090; and University of Michigan, Ann Arbor, Michigan 48019)

Abstract

There is a widely known Bayesian solution to the problem of updating the probability of an event occurring given information on the outcome of n completely similar events. But in many, if not most, cases, we only have information on partially similar events. For example, firms must assess the probability of a new product being successful given information on past products that are only partially similar to the new product. This paper shows how the well-known Bayesian solution for completely similar events can be extended to solve the problem with partially similar past events.

Suggested Citation

  • Robert F. Bordley, 2011. "Using Bayes' Rule to Update an Event's Probabilities Based on the Outcomes of Partially Similar Events," Decision Analysis, INFORMS, vol. 8(2), pages 117-127, June.
    • Handle: RePEc:inm:ordeca:v:8:y:2011:i:2:p:117-127
    DOI: 10.1287/deca.1110.0204
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    References listed on IDEAS

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    Cited by:

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    3. L. Robin Keller, 2011. "From the Editor ---Multiattribute and Intertemporal Preferences, Probability, and Stochastic Processes: Models and Assessment," Decision Analysis, INFORMS, vol. 8(3), pages 165-169, September.
    4. L. Robin Keller & Kelly M. Kophazi, 2012. "From the Editors ---Copulas, Group Preferences, Multilevel Defenders, Sharing Rewards, and Communicating Analytics," Decision Analysis, INFORMS, vol. 9(3), pages 213-218, September.
    5. L. Robin Keller & Kelly M. Kophazi, 2011. "From the Editors---Deterrence, Multiattribute Utility, and Probability and Bayes' Updating," Decision Analysis, INFORMS, vol. 8(2), pages 83-87, June.
    6. Rakesh K. Sarin & L. Robin Keller, 2013. "From the Editors: Probability Approximations, Anti-Terrorism Strategy, and Bull's-Eye Display for Performance Feedback," Decision Analysis, INFORMS, vol. 10(1), pages 1-5, March.
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