Subjective Probability Assessment in Decision Analysis: Partition Dependence and Bias Toward the Ignorance Prior

Management Science, Forthcoming

Posted: 19 Jul 2005

See all articles by Craig R. Fox

Craig R. Fox

University of California, Los Angeles (UCLA) - Anderson School of Management

Robert T. Clemen

Duke University

Abstract

Decision and risk analysts have considerable discretion in designing procedures for eliciting subjective probabilities. One of the most popular approaches is to specify a particular set of exclusive and exhaustive events for which the assessor provides such judgments. We show that assessed probabilities are systematically biased toward a uniform distribution over all events into which the relevant state space happens to be partitioned so that probabilities are "partition-dependent." We surmise that a typical assessor begins with an "ignorance prior" distribution that assigns equal probabilities to all specified events, then adjusts those probabilities insufficiently to reflect his or her beliefs concerning how the likelihoods of the events differ. In five studies, we demonstrate partition dependence for both discrete events and continuous variables (Studies 1 and 2), show that the bias decreases with increased domain knowledge (Studies 3 and 4), and that top experts in decision analysis are susceptible to this bias (Study 5). We relate our work to previous research on the "pruning bias" in fault-tree assessment (e.g., Fischhoff, Slovic, & Lichtenstein, 1978) and show that previous explanations of pruning bias (enhanced availability of events that are explicitly specified, ambiguity in interpreting event categories, demand effects) cannot fully account for partition dependence. We conclude by discussing implications for decision analysis practice.

Keywords: Subjective probability, risk assessment, pruning bias, fault tree

JEL Classification: C91, D81

Suggested Citation

Fox, Craig R. and Clemen, Robert T., Subjective Probability Assessment in Decision Analysis: Partition Dependence and Bias Toward the Ignorance Prior. Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=757785

Craig R. Fox (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Robert T. Clemen

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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