Entropy, Risk and Comparability

Roger Bowden ()
Additional contact information
Roger Bowden: Kiwicap Research Ltd.

Chapter Chapter 7 in The Information Theory of Comparisons, 2018, pp 125-145 from Springer

Abstract: Abstract This chapter elaborates on some of the issues that arise in the theory and practice of distributional comparisons. These range from the nature and scope of probability judgements to the precise nature of the preference functions that may be involved. A recurring theme is that tail probabilities in themselves are not a sufficient guide to decision making; it is the length of the tail that matters. In this respect, tail entropy is an important complexity indicator. A standardisation is proposed that reduces the tail entropy for an arbitrary distribution to a locally equivalent logistic distribution, for which the regime entropies (tail versus the rest) are simply proportional to their respective probabilities. A further general theme concerns just what is meant when one says that outcome distribution A is preferred to B, and whether it is possible to ascribe a numerical value to the difference. This introduces the issue of whether any given underlying preference function is cardinal or ordinal in nature. Subjectivist probability in decision making is a further theme. Some concluding remarks concern possible applications to organisation theory.

Keywords: Underlying Preference Function; Entropic Regime; Tail Probabilities; Utility functionUtility Function; Second-order Stochastic Dominance (SSD) (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-13-1550-3_7

Ordering information: This item can be ordered from
http://www.springer.com/9789811315503

DOI: 10.1007/978-981-13-1550-3_7

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().