Independence and Calibration in Decision Analysis

Independence and Calibration in Decision Analysis

1976Working Paper No. 310

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 (probabilistica1ly) 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.