Question

Which one of the following is NOT a rule for estimatings the subjective probability of outcomes of any decision ?
1. Assessing utility
2. Representativeness
3. Availability
4. Adjustment

Answer 1

Correct Answer - Option 1 : Assessing utility

The correct answer is Assessing utility.

• Subjective probability measures the degree of belief in the likelihood of occurrence of a specific outcome.
  •  It does not require any formal calculations and utility.
  • It is based on the subject's opinion and past experience.
  • It differs from person to person.
  • It contains a high degree of personal bias.
  • It is affected by a variety of beliefs of the person.
  • Example: An analyst may forecast the Sensex opening based on its past trends and current market scenario.

 

• Objective probability is just the opposite of Subjective probability.
  • It is based on statistics, experiments, and mathematical experiments.
  • It is also called frequency probability.
  • Example: The probability of getting heads in a coin is 30% because if a coin is flipped often, It will result in heads 30% of the time.