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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Assessing Probabilities for Events Pertaining to Buy/Sell and Similar Decisions
Author(s)
Warren Richard Hughes
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DOI:10.17265/1537-1506/2017.05.003
Affiliation(s)
The University of Waikato, Hamilton, New Zealand
ABSTRACT
Assessing probabilities for
relevant and sometimes unique events in real-world decision situations can be problematic.
This paper elucidates a 2-step process for assigning probabilities to relevant events
enabling a rational decision process to supersede decision choices based only on
a gut feeling. After assessing probabilities the decision maker can confirm or reverse
a gut feeling choice using expected values for each available act and traditional
decision theory methodology. A simple example involving a buy now or buy later situation
with market uncertainty illustrates the process for typical yes or no decisions.
KEYWORDS
probability assessment, expected value, decision theory
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