Bayesian solutions to a 2 x 2 decision matrix using interval scaled payoffs with an application to foreign policy decisions.
King, Alan R.
Lindsay, Glenn F.
Mansager, Bard K.
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Statistical Design Theory is applied to assessing objectively the uncertainty involved in foreign policy decisions. In an international conflict of insterest situation, a protagionist is going to pursue. This problem is addressed by taking observations of the antagonist's behavior. These observations are interpreted as being associated with a specific course of action. Bayes formula is then used to update a conjectured a priori probability function to estimate the course of action being pursued by the antagonist. This updated (a posteriori) conditional probability function is then used to develop a decision rule to select an appropriate response. The decision rule is based on an ordering of possible outcomes, the values assigned to those outcomes, and greatest expected value of return.