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In How States Think, John Mearsheimer and Sebastian Rosato argue that expected-utility maximization is too subjective to serve as the basis for making rational decisions in the realm of national security. They claim that rationality in security studies should instead be defined by whether leaders conduct deliberative, theory-driven reasoning. This essay explains why Mearsheimer and Rosato's critique of expected-utility theory is unpersuasive, and how their conception of theory-driven reasoning ignores key aspects of decision-making that national security officials can feasibly address. Lyndon Johnson's decision to take the United States to war in Vietnam provides a vivid example of how leaders can meet Mearsheimer and Rosato's criteria for rationality despite clear shortfalls of analytic reasoning. [ABSTRACT FROM AUTHOR] more...

Overconfidence is pervasive in subjective probability distributions (SPDs). We develop new methods to analyze judgments that entail both a distribution of possible outcomes in a population (aleatory uncertainty) and imperfect knowledge about that distribution (epistemic uncertainty). In four experiments, we examine the extent to which subjective probability mass is concentrated in a small portion of the distribution versus spread across all possible outcomes. We find that although SPDs roughly match the concentration of the empirical, aleatory distributions, people's judgments are consistently overconfident because they fail to spread out probability mass to account for their own epistemic uncertainty about the location and shape of the distribution. Although people are aware of this lack of knowledge, they do not appropriately incorporate it into their SPDs. Our results offer new insights into the causes of overconfidence and shed light on potential ways to address this fundamental bias. This paper was accepted by Yuval Rottenstreich, behavioral economics and decision analysis. Funding: Support for this research was provided by the Fuqua School of Business at Duke University and the Haas School of Business at the University of California at Berkeley. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2019.00660. [ABSTRACT FROM AUTHOR] more...

This paper presents a new representation of preference orderings for the study of ambiguity-related decision-making. The central feature is a preference-based decomposition of subjective probabilities that provides information about inherent ambiguity. The probability decomposition is combined with a utility function reflecting the decision-maker's attitude toward ambiguity. The proposed theory generalizes Savage's SEU and allows for a straightforward measurement of ambiguity and ambiguity aversion while keeping concepts for measuring risk and risk attitudes unaffected. For the measurement of ambiguity, concepts of probability theory can be used since decision acts can be interpreted as two-dimensional probability distributions. The proposed measure of ambiguity aversion exploits the properties of the utility function in the same way as the Arrow/Pratt measure of risk aversion. [ABSTRACT FROM AUTHOR] more...

Implied subjective probabilities from futures wagering markets are typically determined using a system known as "fair odds." Here, an alternative system of calculating subjective probabilities—"quasi‐parimutuel"—is offered. Instead of considering individual lines independent of the remainder of the wagering opportunities, the quasi‐parimutuel method considers the ratios of wagers required between lines such that a constant return is generated for every line. As a result, relative to the fair odds system, favorites (underdogs) have higher (lower) subjective probabilities, and expected returns across all wagers vary. [ABSTRACT FROM AUTHOR] more...

Although the subjective expected utility (SEU) theory is more than 60 years old, it was recently discovered by Hartmann (Econometrica 88(1):203–205, 2020, https://doi.org/10.3982/ECTA17428) that one of the original seven postulates is redundant, i.e., it is implied by the other six postulates. In this brief communication, we show that this redundant axiom is the only one that is implied by the other axioms, thereby establishing that the remaining six postulates form an independent axiomatic system. This result further streamlines the preference assumptions underlying the SEU theory. [ABSTRACT FROM AUTHOR] more...

Lack of sufficient knowledge about flood risk can lead to "don't know" responses or non-response in risk perception surveys, and incorrect treatment of these responses can lead to bias in the results. In this study, we focus on the possibility that the "50%" response actually means "fifty-fifty" and thus reflects epistemic uncertainty in the subjective probability of river flooding. We conduct an analysis that introduces a concomitant-variable latent class model as a method to adjust for this epistemic uncertainty. The results of the analysis accounting for epistemic uncertainty suggest that risk communication, such as simulated evacuation experiences and flood-related information distribution, increases subjective probability. Moreover, the proportion of latent classes with epistemic uncertainty decreased with each successive wave of the survey, thereby suggesting that knowledge acquisition and learning through the demonstration experiment led to a reduction in epistemic uncertainty. The analysis using the evacuation decision-making model also suggested that the introduction of subjective probability contributed to improving the likelihood of the model. These results suggest that knowledge acquisition through risk communication and short-term panel survey can lead to correct risk perception estimations and influence evacuation decisions. [ABSTRACT FROM AUTHOR] more...

Education in statistics, the application of statistics in scientific research, and statistics itself as a scientific discipline are in crisis. Within science, the main cause of the crisis is the insufficiently clarified concept of probability. This article aims to separate the concept of probability which is scientifically based from other concepts that do not have this characteristic. The scientifically based concept of probability is Kolmogorov’s concept of probability models together with the conditions of their applicability. Bayesian statistics is based on the subjective concept of probability, and as such can only have a heuristic value in searching for the truth, but it cannot and must not replace the truth. The way out of the crisis should take Kolmogorov and Bayesian analysis as elements, each of which has a well-defined and limited use. Only together with qualitative analysis and other types of quantitative analysis, and combined with experiments, they can contribute to reaching correct conclusions. more...

This paper studies decision-making in the face of two stochastically independent sources of uncertainty. It characterizes axiomatically a Subjective Expected Utility representation of preferences where subjective beliefs consist of a product probability measure. The two key axioms in this characterization both involve some behavioral notions of stochastic independence. Our result can be understood as a purely subjective version of the Anscombe and Aumann (Ann Math Stat 34:199–205, 1963) theorem that avoids the controversial use of exogenous probabilities by appealing to stochastic independence. We also obtain an extension to Choquet Expected Utility representations. [ABSTRACT FROM AUTHOR] more...

We prove the existence of an expected utility function for preferences over probabilistic prospects satisfying Strict Monotonicity, Indifference, the Common Ratio Property, Substitution and Reducibility of Extreme Prospects. The example in [1] that is inconsistent with the existence of a von Neumann-Morgenstern for preferences over probabilistic prospects, violates the Common Ratio Property. Subsequently, we prove the existence of expected utility functions with piecewise linear Bernoulli utility functions for preferences that are piece-wise linear. For this case a weaker version of the Indifference Assumption that is used in the earlier existence theorems is sufficient. We also state analogous results for probabilistic lotteries. We do not require any compound prospects or mixture spaces to prove any of our results. In the third last section of this paper, we "argue" that the observations related to Allais paradox, do not constitute a violation of expected utility maximization by individuals, but is a likely manifestation of individuals assigning (experiment or menu-dependent?) subjective probabilities to events which disagree with their objective probabilities. [ABSTRACT FROM AUTHOR] more...

Evaluative knowledge of an object domain can be represented not only as an objective (statistical) probability, but also as a subjective (expert) probability. Expert evaluations may be incomplete and uncoordinated with each other. An instrument is needed to check the coordination of expert knowledge. The paper presents a formalization of the subjective interpretation of probability in the language of the theory of fuzzy models. This allows us to formulate coordination criteria for evaluative knowledge obtained from experts. Various properties of coordinated evaluative knowledge are described, the concept of a minimal fuzzy model coordinated with a given evaluative knowledge is considered, and the uniqueness criteria for such a model are investigated. [ABSTRACT FROM AUTHOR] more...

This work was developed at the Dr. Publio Escobar Gómez Hospital in Ecuador. The objective is to reduce pain and tone the abdominal and back muscles in adults with lumbosciatica through the application of hypopressive abdominal training to help reintroduce the adult to their work and social activities. We worked with a population of 25 male and female adult patients, with an age range from 30 to 50 years old. To process the collected data, we determined that classical statistics are too restrictive in terms of the hypotheses to fulfill. For example, the initial evaluation employing the Visual Analogue Scale (VAS) that assesses the intensity of pain is subjective and depends on the pain threshold of each patient, moreover, the size of the population is not large (<30), therefore it is not possible to carry out a study with the rigor required by classical statistics to infer. That is why we have decided to use neutrosophic statistics to process the data, which will consist of pain scales in the form of intervals, which will contain indeterminacy. The statistical test selected was the T-test for paired samples. In addition to the fact that neutrosophic statistics admit the principles of De Finetti's subjective probabilities and the statistics derived from it, where objective evidence through a random sample is not needed to reach valid conclusions. [ABSTRACT FROM AUTHOR] more...

This paper offers a constructively critical examination of George Shackle's theory of expectations and decision-making under uncertainty, a theory that Shackle developed because he questioned the relevance of objective probabilities as foundations for expectations. His theory is cast in terms of degrees of possibility and potential for surprise associated with disbelief that comes from imagining things that could prevent outcomes from eventuating. His idea that there may be ranges of mutually exclusive "perfectly possible" events has posed a problem for blending his thinking with the subjective probability approach, but here it is argued that this idea is flawed. Shackle's theory of how expectations are deployed in making choices involves a reference-dependent theory of attention that results in focus on best-case and worst-case pairs of outcomes for each scheme. The paper identifies potential synergies with this idea and prospect theory and explores emotion- and satisficing-based perspectives as well as Shackle's formal analysis of how focus outcomes are used in ranking rival schemes of action. [ABSTRACT FROM AUTHOR] more...

Expert judgment plays an essential role in assessing the safety of levees, since these very long structures are generally old, few data are available for them, and they are subject to complex failure mechanisms. Expert judgement is required to assess the failure probabilities of levees when carrying out risk analysis studies. However, expert judgement is subject to biases that are highly likely to impair the quality of the probabilistic assessments obtained. This article presents a method for reducing biases in expert opinion, illustrated by its application to the case of an existing levee. Initially, the method comprises the calibration of the opinions of a panel of six experts based on the results of a quantitative analysis applied to 30 levee cross-sections for which numerical calculations were performed. It then proposes a procedure to debias expert assessments using bias correction coefficients. Regarding its application, the assessments made by the experts were debiased for 30 calibration variables. The correction coefficients obtained were then applied for the assessment of 10 variables of interest. The results show a significant reduction of biases, associated with a readjustment of the uncertainty intervals given by the experts. [ABSTRACT FROM AUTHOR] more...

Rachlin and colleagues laid the groundwork for treating the discounting of probabilistic goods as a variant of the discounting of delayed goods. This approach was seminal for a large body of subsequent research. The present paper finds the original development problematic: In converting probability to delay, the authors incorrectly dropped trial duration. The subsumption of probability by delay is also empirically questionable, as those are different functions of variables such as magnitude of outcome and commodity versus money. A variant of Rachlin's theme treats human discounting studies as psychophysical matching experiments, in which one compound stimulus is adjusted to equal another. It is assumed that a function of amount (its utility) is multiplied by a function of probability (its weight). Conjoint measurement establishes the nature of these functions, yielding a logarithmic transform on amount, and a Prelec function on probability. This model provides a good and parsimonious account of probability discounting in diverse data sets. Variant representations of the data are explored. By inserting the probabilistically discounted utility into the additive utility theory of delay discounting, a general theory of probabilistic intertemporal choice is achieved. [ABSTRACT FROM AUTHOR] more...

We propose a model of an agent's probability and utility that is a compromise between Savage (The foundations of statistics, Wiley, 1954) and Jeffrey (The Logic of Decision, McGraw Hill, 1965). In Savage's model the probability–utility pair is associated with preferences over acts which are assignments of consequences to states. The probability is defined on the state space, and the utility function on consequences. Jeffrey's model has no consequences, and both probability and utility are defined on the same set of propositions. The probability–utility pair is associated with a desirability relation on propositions. Like Savage we assume a set of consequences and a state space. However, we assume that states are comprehensive, that is, each state describes a consequence, as in Aumann (Econometrica 55:1–18, 1987). Like Jeffrey, we assume that the agent has a preference relation, which we call desirability, over events, which by definition involves uncertainty about consequences. For a given probability and utility of consequences, the desirability relation is presented by conditional expected utility, given an event. We axiomatically characterize desirability relations that are represented by a probability–utility pair. We characterize the family of all the probability–utility pairs that represent a given desirability relation. [ABSTRACT FROM AUTHOR] more...

This note is devoted to the problem of signaling (marginal inconsistency) in the Bell-type experiments with physical and cognitive systems. It seems that in quantum physics, this problem is still not taken seriously. Only recently have experimenters started to check the signaling hypothesis for their data. For cognitive systems, signaling was statistically significant in all experiments (typically for decision making) performed up to today. Here, one cannot simply ignore this problem. Since signaling contradicts the quantum theory of measurement for compatible observables, its statistical significance in experiments with humans can be considered as an objection for quantum-like modeling—applications of quantum theory to cognition, decision making, psychology, economics and finance, social and political science. In this paper, we point to two possible sources of signaling generation that are consistent with quantum measurement theory. Thus, the signaling objection for quantum-like modeling is not catastrophic. One of these sources is the direct physical signaling about selection of experimental settings, questions or tasks in quantum-like studies. Another possible source is a state modification dependent on experimental settings. The latter was a rather common source of signaling in quantum physics. Since the physical size of the brain is very small comparing with the light velocity, it seems to be impossible to prevent the direct physical signaling (with electromagnetic waves) between the brain's areas processing two questions a and b . However, if, for these questions, not the electromagnetic waves, but electrochemical communication plays the crucial role, the experimenter may hope to make signaling weaker by answering the questions faster. The problem of question-dependent mental state modification seems to be solvable via smarter experimental design. This paper can be useful both for physicists interested in quantum foundations and for researchers working in quantum-like studies, e.g., applying the quantum theory to model decision making or psychological effects. This paper is solely about quantum theory. Thus, we do not consider general contextual probabilistic models. [ABSTRACT FROM AUTHOR] more...

Copyright of Revue Economique is the property of Fondation Nationale des Sciences Politiques and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.) more...

The process of revising the Guide to the Expression of Uncertainty in Measurement (GUM) is ongoing. A successful revision must be theoretically sound, so it must be based on a recognized paradigm for scientific data analysis. The major candidate paradigms of statistical inference are the frequentist paradigm — where probability statements are only used to describe the frequency behaviour of processes — and the Bayesian paradigm — where probability statements are also used to describe the degree of belief of the speaker and where the subject of that belief may be the unknown value of a constant. These paradigms are incompatible, and there remains disagreement about which should form the basis of the practical procedures advocated in a revised GUM. This paper uses published results to examine foundational ideas in two different Bayesian approaches, which themselves are inconsistent at a basic, conceptual, level. So-called ‘objective’ Bayesian statistics is based on the premise that a probability distribution can accurately represent a set of information about a constant, which is a premise of the system of analysis currently favoured by the BIPM. This premise is proven to lead to a logical contradiction, which renders the theory untenable. In contrast, subjective Bayesian methods are theoretically satisfactory if they are used in their proper context, which is the context of personal decision-making. But simple examples show that the use of subjective probability in a client-centred measurement can lead to unacceptable results. These examples involve the mixing of epistemic uncertainty (the uncertainty of personal doubt) with aleatory uncertainty (the uncertainty of an unpredictable physical process). They show that these two types of uncertainty cannot always be treated as one, which is a conclusion with profound implications for the role of Bayesian statistics in science. The analysis in this paper also involves a discussion of the ‘meaning’ of probability, which has been a divisive subject for many years. It is argued here that the implied question is inappropriate: the relevant question is not “what does probability mean?” but “what role can probability meaningfully and accurately play?” The results about objective and subjective Bayesian statistics discussed in this paper support the conclusion that a sound and practical system of analysis must be based on the frequency role of probability. more...

The paper investigates the validity of individual perceptions of heart disease risks, and examines how information and risk perceptions affect marginal willingness to pay (MWTP) to reduce risk, using data from a stated preference survey. Results indicate that risk perceptions held before receiving risk information are plausibly related to objective risk factors and reflect individual-specific information not found in aggregate measures of objective risk. After receiving information, individuals' updates of prior risk assessments are broadly consistent with Bayesian learning. Perceived heart disease risks thus satisfy construct validity and provide a valid basis for inferring MWTP to reduce risk. Consistent estimators of the relationship of MWTP to endogenously perceived risk are developed. Estimating MWTP based on objective rather than subjective risks causes misleading inferences about benefits of risk reduction. An empirical case study shows that estimated benefits may be as much as 60–98 % higher when estimated using individuals' heterogeneous perceptions of risk than when using aggregate estimates of objective risk. The main contributions include assessing the validity of risk perceptions and their updating, consistently estimating the relationship between MWTP and endogenously perceived risk, and demonstrating the importance of employing risk perception information for accurate benefit measurement. [ABSTRACT FROM AUTHOR] more...

Copyright of Procesos de Mercado is the property of Procesos de Mercado. Revista Europea de Economia Politica and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.) more...

In this paper I model a decision maker who forms beliefs and opinions using a dialectic heuristic that depends on their degree of skepticism or credulity. In an application to political spin, two competing parties choose how to frame commonly observed evidence. If the receiver is sufficiently credulous, equilibrium spin is maximally extreme and generates short, superficial news cycles. When receivers vary in their skepticism, there is partisan sorting by skepticism parameter: the more credulous group systematically favors one party and displays hostility to evidence and a media they see as biased. In behavioral applications in which the frames arise from the decision maker's internal deliberation, a decision maker with the same credulous nature would display known behavioral anomalies in forming beliefs and forming decision weights from stated probabilities. The dialectic model therefore captures a simple psychological mechanism and matches closely some stylized facts across these three disparate applications. [ABSTRACT FROM AUTHOR] more...

An aspect of Peirce's thought that might still be underappreciated is his resistance to what Levi calls pedigree epistemology, i.e., to the idea that a central focus in epistemology should be the justification of current beliefs. Somewhat more widely appreciated is his rejection of the subjective view of probability. We argue that Peirce's criticisms of subjectivism, to the extent that they grant that such a conception of probability is viable at all, revert back to pedigree epistemology. A thoroughgoing rejection of pedigree in the context of probabilistic epistemology, however, does challenge prominent subjectivist responses to the problem of the priors. [ABSTRACT FROM AUTHOR] more...

According to an infinite frequency principle, it is rational, under certain conditions, to set your credence in an outcome to the limiting frequency of that outcome if the experiment were repeated indefinitely. I argue that most infinite frequency principles are undesirable in at least one of the following ways: (1) accepting the principle would lead you to accept bets with sure losses, (2) the principle gives no guidance in the case of deterministic experiments like coin tosses and (3) the principle relies on a metaphysical property, ‘chanciness’, whose necessary and sufficient conditions are unknown. I show that a frequency principle that is based on the principal principle suffers from problems related to the definition of ‘chance’ or ‘chanciness’, which could lead to all three of the above problems. I introduce a version of the infinite frequency principle that does not rely on a notion of chance or chanciness and does not suffer from any of these problems. [ABSTRACT FROM AUTHOR] more...

This essay discusses the difficulty to reconcile two paradigms about beliefs: the binary or categorical paradigm of yes/no beliefs and the probabilistic paradigm of degrees of belief. The possibility for someone to hold beliefs of both types simultaneously is challenged by the lottery paradox, and more recently by a general impossibility theorem by Dietrich and List. The nature, relevance, and implications of the tension are explained and assessed. more...

This essay discusses the difficulty to reconcile two paradigms about beliefs: the binary or categorical paradigm of yes/no beliefs and the probabilistic paradigm of degrees of belief. The possibility for someone to hold beliefs of both types simultaneously is challenged by the lottery paradox, and more recently by a general impossibility theorem by Dietrich and List. The nature, relevance, and implications of the tension are explained and assessed. [ABSTRACT FROM AUTHOR] more...

Kahneman and Tversky showed that when people make probability judgements, they tend to ignore relevant statistical information (e.g., sample size) and instead rely on a representativeness heuristic, whereby subjective probabilities are influenced by the degree to which a target is perceived as similar to (representative of) a typical example of the relevant population, class or category. Their article has become a cornerstone in many lines of research and has been used to account for various biases in judgement and decision-making. Despite the impact this article has had on theory and practice, there have been no direct replications. In a pre-registered experiment ( N  = 623; Amazon MTurk on CloudResearch), we conducted a replication and extensions of nine problems from Kahneman and Tversky's 1972 article. We successfully replicated eight out of the nine problems. We extended the replication by examining the consistency of heuristic responses across problems and by examining decision style as a predictor of participants' use of the representativeness heuristic. Materials, data, and code are available on: https://osf.io/nhqc4/., Competing Interests: Declaration of conflicting interestsThe author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article. more...