Multi-objective Decision Analysis

Thinking About Probability

Many people become familiar with the concept of probability from ­everyday conversations. What is the probability of rain today? What is the chance of getting stuck in traffic? What is the likelihood of having a particular illness? What are the odds our favorite sports team will win the game? When someone says there is a 90 percent chance of the ­freeway looking like a parking lot, we typically prepare to be stuck in traffic. ­Alternatively, when the person says there is only a 10 percent chance of the freeway being congested, we worry less about the possibility of traffic.

Intuitively, people tend to think about probabilities as long-run ­relative frequencies.1 When a friend asks about the probability of our favorite ...