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1 – 10 of over 15000This chapter documents an exchange between Leonard Savage, founder of the subjective probability approach to decision-making, and Karl Popper, advocate of the so-called propensity…
Abstract
This chapter documents an exchange between Leonard Savage, founder of the subjective probability approach to decision-making, and Karl Popper, advocate of the so-called propensity approach to probability, of which there is no knowledge in the literature on probability theory. Early in 1958, just after being informally tested by Daniel Ellsberg with a test of consistency in decision-making processes that originated the so-called Ellsberg Paradox, Savage was made aware that a similar argument had been put forward by Popper. Popper found it paradoxical that two apparently similar events should be attributed the same subjective probability even though evidence supporting judgment in one case was different than in the other case. On this ground, Popper rejected the subjective probability approach. Inspection of the Savage Papers archived at Yale University Library makes it possible to document Savage’s reaction to Popper, of which there is no evidence in his published writings. Savage wrote to Popper denying that his criticism had paradoxical content and a brief exchange followed. The chapter shows that while Savage was unconvinced by Popper’s argument he was not hostile to an axiomatically founded generalization of his theory.
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The purpose of this paper is to theorize the existing idea of subjective probability a la Keynes’s Treatise on Probability Theory. Then to show that, under the especial kind of…
Abstract
Purpose
The purpose of this paper is to theorize the existing idea of subjective probability a la Keynes’s Treatise on Probability Theory. Then to show that, under the especial kind of financial valuation model in the absence of interest rate and speculation, subjective probability is not of a major concern in Islamic financial theory.
Design/methodology/approach
The topic is of an epistemological nature premised on the Islamic unity of knowledge and the world-system with special attention given to the formulation of the financial model for evaluation under its unitary characteristic at each time period of financial evaluation. The approach, while being epistemological, is also mathematical in the financial valuation field.
Findings
Mathematical calculation of approximate solution using Newton-Raphson method applied to Islamic financial valuation model with yields, evolutionary learning and of the nature of unitary discursive experience at every stage of valuation taken continuously establishes the innovative method approximating subjective probability of events to limiting negligible field.
Practical implications
The nature and importance of Islamic valuation models brings about the implication of diversification of risk and production diversification that altogether underlie the limiting phenomenon of subjective probability in a narrow closure.
Social implications
The epistemological implication of unity of knowledge and unity of the specific events during the valuation experience causes the socio-economic system to gain increasing levels of stability and certainty while subjective probability narrows down in its small closure.
Originality/value
This paper is boldly original in the light of its methodology that addresses the much pursued topic of subjective probability in the Islamic heterodox economic and financial field.
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The Austrian economist Ludwig Lachmann claimed that Keynes was a lifelong subjectivist. To evaluate this, we start by distinguishing Keynes’ writings on probability theory from…
Abstract
The Austrian economist Ludwig Lachmann claimed that Keynes was a lifelong subjectivist. To evaluate this, we start by distinguishing Keynes’ writings on probability theory from his writings on economics. In the General Theory (1936), Keynes’ treatment of expectations provides the basis for Lachmann’s view that Keynes was a subjectivist at heart. In his Treatise on Probability (1921), Keynes refers explicitly to the subjectivism–objectivism divide in probability theory and pins his colors to the objectivist mast. In this essay, we present the objectivist slant in Keynes’ earlier writings on probability theory. Thereafter, we evaluate the criteria Lachmann employed to cast Keynes as a subjectivist.
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Paul Lewis Reynolds and Geoff Lancaster
The purpose of this paper is to suggest a framework for sales forecasting more suitable for smaller firms. The authors examine the sales forecasting practices of small firms and…
Abstract
Purpose
The purpose of this paper is to suggest a framework for sales forecasting more suitable for smaller firms. The authors examine the sales forecasting practices of small firms and then proceed to discuss the application of Bayesian decision theory in the production of sales forecasts, a method arguably more suited to the smaller firm. The authors suggest that many small firm entrepreneurs are inherently “Bayesian” in their thinking approach to predicting events in that they often rely on subjective estimates at least for initial starting values.
Design/methodology/approach
A triangulated approach which uses qualitative group discussions and thematic content analysis, a reasonably large‐scale questionnaire sample survey administered by post and analysed using descriptive statistics and non‐parametric tests of association and a case study approach based on the authors own consultancy activities to illustrate the practical application of the forecasting model suggested.
Findings
That many small firms use no formal sales forecasting framework at all. That the majority of small firm owners and/or managers rate sales forecasting skills very low in their list of priorities when given a choice of course to attend at subsidised rates. That there is no significant difference in the importance small firm owners and/or managers attach to formal sales forecasting skills.
Research limitations/implications
Information has been gained from one geographic area in the north of England although the results may have a wider application to all small firms in the UK and elsewhere. Only the region's six most important industry sectors were included as stratification variables in the sample survey. Other regions will have a different mix of industries and will be stratified differently.
Originality/value
The article addresses the sales forecasting needs of small firms specifically within the marketing for small business context and offers a realistic option with a clear rationale.
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Sungchul Choi, Xin Ge and Paul R. Messinger
The purpose of this paper is to examine how consumers respond differently to “scratch and save (SAS)” promotions versus “tensile price claims (TPC).” SAS promotions provide a…
Abstract
Purpose
The purpose of this paper is to examine how consumers respond differently to “scratch and save (SAS)” promotions versus “tensile price claims (TPC).” SAS promotions provide a possible discount (determined probabilistically) but conceal the exact amount until purchase. Tensile price claims (e.g. “up to 25 percent off on items marked with a red tag”) make imprecise price promotional claims. In addition to making indefinite price claims, SAS promotions (e.g. scratch and save up to 25 percent off) include gambling elements; the exact discount is determined randomly for individual consumers by a scratch‐off card.
Design/methodology/approach
Two experimental studies are conducted.
Findings
Evidence from two experiments indicates that consumers perceive SAS promotions to be more ambiguous than tensile price claims. In addition, the results demonstrate consumer uncertainty towards SAS promotions but also consumer willingness to gamble: deep discount SAS promotions are perceived as more attractive than limited‐scope tensile price claims.
Practical implications
The findings suggest that consumers perceive SAS offers more enticing than limited tensile price claims as the proposed discount increases. Furthermore, establishing a minimum savings offer could be used to encourage consumers to shop at retailers offering SAS promotions.
Originality/value
Limited work has focused on examining how consumers respond to SAS promotions because SAS promotions are a relatively new store‐level promotional tool. Furthermore, no research effort has been extended to directly compare consumers' perceptions of SAS promotions with tensile price claims.
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Today most maintenance optimization models are established and interpreted within the classical statistical framework. There exist true failure time distributions and cost…
Abstract
Today most maintenance optimization models are established and interpreted within the classical statistical framework. There exist true failure time distributions and cost functions which we have to estimate. Using this approach, the results from the analysis are to a large extent disturbed by a discussion of uncertainty of the estimates. In this note we draw attention to an alternative approach: the fully Bayesian approach with focus on observable quantities and using subjective probabilities. We argue that this latter approach is more suitable as a tool for making decisions. The subjectivistic approach provides the framework of coherent use of (expert) judgment, which constitutes a significant (sometimes the only) part of information that is available to us.
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Risk and uncertainty are, to say the least, poorly considered bymost individuals involved in real estate analysis – in bothdevelopment and investment appraisal. Surveyors continue…
Abstract
Risk and uncertainty are, to say the least, poorly considered by most individuals involved in real estate analysis – in both development and investment appraisal. Surveyors continue to express “uncertainty” about the value (risk) of using relatively objective methods of analysis to account for these factors. These methods attempt to identify the risk elements more explicitly. Conventionally this is done by deriving probability distributions for the uncontrolled variables in the system. Presents a suggested “new” way of expressing our uncertainty or slight vagueness about some of the qualitative judgements and not entirely certain uses of fuzzy logic applied to real estate problems. Discusses and demonstrates the terminology and methodology of fuzzy analysis. In particular, attempts a comparison of fuzzy procedures with those used in “conventional” risk analysis approaches and critically investigates whether a fuzzy approach offers an alternative to the use of probability based analysis for dealing with aspects of risk and uncertainty in real estate analysis.
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Fangcheng Hao and Hailiang Yang
The purpose of this paper is to provide a scenario‐based risk measure for a portfolio of European‐style derivative securities over a fixed time horizon under the regime switching…
Abstract
Purpose
The purpose of this paper is to provide a scenario‐based risk measure for a portfolio of European‐style derivative securities over a fixed time horizon under the regime switching Black‐Scholes economy.
Design/methodology/approach
The risk measure is constructed by using the risk‐neutral probability, the physical probability and a family of subjective probability measures. The subjective probabilities can be interpreted as risk managers or regulators' risk preferences and/or subjective beliefs.
Findings
The authors provide closed form expressions for the European option and barrier option.
Research limitations/implications
The results are difficult to apply to a portfolio with many different kinds of options.
Practical implications
The results provide some insights on risk management of portfolios with derivatives.
Originality/value
The paper presents a scenario‐based risk measure for a portfolio of European‐style derivative securities over a fixed time horizon under the regime switching Black‐Scholes economy. Risk management is the most important task for almost all financial industries, although it cannot be claimed that the method and results of this paper solve the problem, it is believed to provide some insights to the problem, albeit theoretical. For vanilla European options and barrier options, the authors obtained a closed form expression for the risk measure. The idea of this paper can be applied to some other exotic options. For portfolios containing different kinds of derivatives, the results of this paper provide some guideline and insights.
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Reviews the literature on consumer‐perceived risk over the past 30 years. The review begins by establishing perceived risk’s relationship with related marketing constructs such as…
Abstract
Reviews the literature on consumer‐perceived risk over the past 30 years. The review begins by establishing perceived risk’s relationship with related marketing constructs such as involvement and trust. It then tackles some debates within the literature, concerning subjective and objective risk and differences between the concepts of risk and uncertainty. It describes how different models have been devised and operationalised to measure risk and how these have developed over the years. Aims to identify and report the theoretical and model developments over the past 30 years and to propose criteria which researchers can use in deciding the most useful model for their own research. The criteria are: understanding, prediction, suitability for reliability and validity assessment, practicality and usability. It is suggested that the basic two‐component model is still the most generally useful for researchers and practitioners alike.
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Eric Flamholtz and Jack B. Wollman
‘Human resource accounting’ (HRA) is a term of relatively recent origin: research on HRA only began during the 1960s. Initially, the objective was to improve corporate financial…
Abstract
‘Human resource accounting’ (HRA) is a term of relatively recent origin: research on HRA only began during the 1960s. Initially, the objective was to improve corporate financial reporting by accounting for ‘human assets’ and, in turn, to increase the representational validity of income and asset numbers. A related purpose was to prevent prevailing accounting conventions from motivating suboptimal treatment of people — specifically, to reduce the likelihood that liquidation of human resources would not be revealed in financial reports because of the failure to account for investments in people as assets.