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Independence and Calibration in Decision Analysis

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  • J. Michael Harrison

    (Stanford University)

Abstract

An individual is said to be potentially miscalibrated if he is not sure whether his future subjective probability assessments will agree with observed frequency. Alternately, the individual is said to be uncertain about his own calibration. It is argued that such a person will never perceive any two events as (probabilistically) independent, in the same sense that an ignorant person does not perceive events as certain. Uncertainty about one's own calibration does not prevent rational behavior in the decision theoretic sense, but it may make much more difficult the process of translating decision theoretic principles into practical procedures for analysis of real decision problems.

Suggested Citation

  • J. Michael Harrison, 1977. "Independence and Calibration in Decision Analysis," Management Science, INFORMS, vol. 24(3), pages 320-328, November.
    • Handle: RePEc:inm:ormnsc:v:24:y:1977:i:3:p:320-328
    DOI: 10.1287/mnsc.24.3.320
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    Cited by:

    1. Bier, Vicki M. & Yi, Woojune, 1995. "A Bayesian method for analyzing dependencies in precursor data," International Journal of Forecasting, Elsevier, vol. 11(1), pages 25-41, March.
    2. Amin H. Amershi & Joel S. Demski & John Fellingham, 1985. "Sequential Bayesian Analysis in accounting settings," Contemporary Accounting Research, John Wiley & Sons, vol. 1(2), pages 176-192, March.
    3. Erin Baker & Olaitan Olaleye, 2013. "Combining Experts: Decomposition and Aggregation Order," Risk Analysis, John Wiley & Sons, vol. 33(6), pages 1116-1127, June.
    4. Nicholas Matalas & Vicki Bier, 1999. "B. Extremes, Extrapolation, And Surprise," Risk Analysis, John Wiley & Sons, vol. 19(1), pages 49-54, February.
    5. James E. Smith & Detlof von Winterfeldt, 2004. "Anniversary Article: Decision Analysis in Management Science," Management Science, INFORMS, vol. 50(5), pages 561-574, May.
    6. Joel S. Demski, 2003. "Corporate Conflicts of Interest," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 51-72, Spring.

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