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An ideal observer would set her criterion higher (need better evidence before saying “Yes”) to the degree that noise is likelier than a signal (a low Bayesian prior). It’s common sense: if signals are rare, you should say “Yes” less often. She should also set a higher bar when the payoffs for hits are lower or for correct rejections are higher,
Rationality: What It Is, Why It Seems Scarce, Why It Matters
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