Posted Date: 06/20/2022
Uncertainty and subjective probability of corporate management
Decision making is not about the past, but about the future intrinsically. On the other hand, the essence of the future lies in uncertainty. So, decision making is something about uncertainty. Uncertainty means unpredictability, which means it is random.v
The randomness of this unpredictability can be expressed in other forms of randomness. It is the randomness expressed on the probability distribution. Suppose you toss a coin 100 times and count the number of heads that appear. The reason you are doing this probability experiment is to determine (inference) and determine that the coins used to toss are not balanced. It is reasonable to believe that the number of heads appearing 90 or 15 is statistical evidence that the coin is not balanced.
However, where should the boundary line be drawn for making such statistical inferences? Is the number of heads appearing 77, 65, or 55? We cannot draw any conclusions from a sample of 100 tossing a coin without knowing the distribution of probability that a balanced coin will appear heads.