The Assessment of Statistical Information
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The formal analysis of the option to incorporate a given information source into a decision problem requires the DM to enumerate the potential messages, ascertain the statistical relationship between each potential message and each possible state of nature, decide upon the optimal decision rule conditional on each message, and recognize that information processing has costs that may depend upon any and all of these activities. Optimal incorporation requires considerable specificity in the framing of the problem; one of the key ingredients is the specification of the statistical characteristics of the random variables. Under the prerequisite that the resulting assessments are coherent with the laws of probability, this chapter offers an overview of techniques for eliciting prior knowledge and for developing foreknowledge of the information structure.
KeywordsGross Domestic Product Posterior Distribution Prior Distribution Decision Problem Forecast Error
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