Adaptive Percolation Using Subjective Likelihoods

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

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Author(s)

  • Nozer D. Singpurwalla

Detail(s)

Original languageEnglish
Pages (from-to)379-394
Journal / PublicationEconometric Reviews
Volume33
Issue number1-4
Publication statusPublished - Feb 2014

Abstract

A phenomenon that I call "adaptive percolation" commonly arises in biology, business, economics, defense, finance, manufacturing, and the social sciences. Here one wishes to select a handful of entities from a large pool of entities via a process of screening through a hierarchy of sieves. The process is not unlike the percolation of a liquid through a porous medium. The probability model developed here is based on a nested and adaptive Bayesian approach that results in the product of beta-binomial distributions with common parameters. The common parameters happen to be the observed data. I call this the percolated beta-binomial distribution. The model turns out to be a slight generalization of the probabilistic model used in percolation theory. The generalization is a consequence of using a subjectively specified likelihood function to construct a probability model. The notion of using likelihoods for constructing probability models is not a part of the conventional toolkit of applied probabilists. To the best of my knowledge, a use of the product of beta-binomial distributions as a probability model for Bernoulli trials appears to be new. The development of the material of this article is illustrated via data from the 2009 astronaut selection program, which motivated this work. © 2014 Copyright Taylor and Francis Group, LLC.

Research Area(s)

  • Bernoulli trials, Beta-binomial distribution, Finance, Layered defense, Percolated beta-binomial distribution, Percolation, Source selection

Citation Format(s)

Adaptive Percolation Using Subjective Likelihoods. / Singpurwalla, Nozer D.

In: Econometric Reviews, Vol. 33, No. 1-4, 02.2014, p. 379-394.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal