MS&E 107 Lecture Notes - Lecture 4: Hyperbola, Unit Square, Exponential Decay
13 Oct 2016
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Real case: public perception and understanding of risk, probability, uncertainty. Have different levels, weights assigned to various conditions. Weights may be agreed upon (but still uncertain though) Don"t know which event will happen (50% no injury, 25% minor, 15% major, 10% death) Total score: 17 * 3 people exposed = 51. Q1: the risk score of 17 implies a 10% chance of one death when one person exposed. Therefore the risk score of 51 indicates that the chance of three deaths is: Reason: we do not know anything about statistical or probabilistic independence of the three deaths (are they linked, or not?) 10% will be the answer if one person dies, then all people die. Less than 10%: answer if we assume full independence. Procedure a: patient has 90% chance of surviving, or procedure b: patient has 10% chance dying. Theory of rational expectations - struck down by behavioral economics.
