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Published online by Cambridge University Press: 05 January 2013
A major part of this book is devoted to understanding subjective probabilities and their derivation from axioms on behavior. This chapter deals with the concept in a more direct way. I start with two examples and then discuss the notion of Bayesian statistics, namely, statistical inference relying on subjective probabilities.
LINDA THE BANK TELLER
The third approach to probability assignments is to treat probabilities as purely subjective. According to this approach, saying that the probability of event A is p does not describe a property of the event. Rather, it reflects one person's beliefs about it. The basic idea is to use the machinery of probability theory as a tool to model beliefs, and perhaps to clarify and sharpen them in the process.
To understand how the probability model can help us sharpen our intuitions, let us consider a famous example of an experiment by Tversky and Kahneman (1974). Participants were asked to fill a questionnaire, in which one of the questions read as follows:
Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and she participated in antinuclear demonstrations. […]
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