The subjective method of assigning probability is based on the feelings or insight of the person determining the probability. Subjective probability comes from the person’s institution of reasoning. Although not a scientific approach to probability, the subjective method often is based on the accumulation of knowledge, understanding, and experience stored and processed in the human mind. At times it is merely a guess. At other times, subjective probability can potentially yield accurate probabilities. Subjective probability can be used to capitalize on the background of experienced workers and managers in decision making.
Suppose a director of transportation for an oil company is asked the probability of getting a shipment of oil out of Saudi Arabia to the United States with there weeks. A director who has scheduled many such shipments, has knowledge of Saudi Politics, and has an awareness of current climatological and economic conditions may be able to give an accurate probability that the shipment can be made on time.
Subjective probability also can be a potentially useful way of tapping a person’s experience, knowledge, and insight and using them to forecast the occurrence of some event. An experienced airline mechanic can usually assign a meaningful probability that a particular plane will have a certain type of mechanical difficulty. Physicians sometimes assign subjective probabilities to the life expectancy of people who have cancer.
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