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

Robert F. Bordley ()
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Robert F. Bordley: General Motors Technical Center, Warren, Michigan 48090; and University of Michigan, Ann Arbor, Michigan 48019

Decision Analysis, 2011, vol. 8, issue 2, 117-127

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.

Keywords: updating probabilities; decision analysis; conditional probabilities; human memory; pseudocounts; similarity (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ordeca:v:8:y:2011:i:2:p:117-127

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