On the Role of Decision Theory in Uncertainty Analysis

Details On the Role of Decision Theory in Uncertainty Analysis On the Role of Decision Theory in Uncertainty Analysis

2010-09-22

arxiv.org/abs/1009.4342v1

Statistics

Applications

28 pages 5 figures, submitted to "Reliability Engineering & System Safety"

Scientific paper

Maximum likelihood estimation (MLE) and heuristic predictive estimation (HPE) are two widely used approaches in industrial uncertainty analysis. We review them from the point of view of decision theory, using Bayesian inference as a gold standard for comparison. The main drawback of MLE is that it may fail to properly account for the uncertainty on the physical process generating the data, especially when only a small amount of data are available. HPE offers an improvement in that it takes this uncertainty into account. However, we show that this approach is actually equivalent to Bayes estimation for a particular cost function that is not explicitly chosen by the decision maker. This may produce results that are suboptimal from a decisional perspective. These results plead for a systematic use of Bayes estimators based on carefully defined cost functions.

Affiliated with

Also associated with

No associations

Rating

On the Role of Decision Theory in Uncertainty Analysis does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with On the Role of Decision Theory in Uncertainty Analysis, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and On the Role of Decision Theory in Uncertainty Analysis will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-637868