IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Inferences from alarming events

Listed author(s):
  • John W. Pratt
  • Richard J. Zeckhauser

An extreme event, such as a nuclear accident, an earthquake, a cluster of adverse reactions to a particular drug, or excessive breakdowns of some class of equipment, frequently focuses attention for the first time on an important issue. By then, however, data on the incidence and magnitudes of relevant past events may be unavailable or too costly to reconstruct. Using a simple probability model, we derive methods for drawing statistical inferences based only on the magnitude of the first event noticed and the amount of exposure before this event occurred. We assume that an event is noticed only when its magnitude exceeds some threshold, and we develop methods of inference that are valid even when this threshold is unknown. One tempting but incorrect approach is to treat the magnitude of the observed event as if it were the threshold, forgetting that smaller magnitudes might have been noticed as well. The biases that arise when this mistake is made turn out to be substantial; risks can easily be overstated by a factor of 3.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Link to full text; subscription required
Download Restriction: no

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

Volume (Year): 1 (1982)
Issue (Month): 3 ()
Pages: 371-385

in new window

Handle: RePEc:wly:jpamgt:v:1:y:1982:i:3:p:371-385
DOI: 10.2307/3324355
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wly:jpamgt:v:1:y:1982:i:3:p:371-385. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.