Abstract
We introduce two indices for the degree of incoherence in a set of lower and upper previsions: maximizing the rate of loss the incoherent Bookie experiences in a Dutch Book, or maximizing the rate of profit the Gambler achieves who makes Dutch Book against the incoherent Bookie. We report how efficient bookmaking is achieved against these two indices in the case of incoherent previsions for events on a finite partition, and for incoherent previsions that include also a simple random variable. We relate the epsilon-contamination model to efficient bookmaking in the case of the rate of profit.
Keywords. Dutch Book, coherence, epsilon-contamination model
The paper is available in the following formats:
Authors addresses:Dept. of Statistics
E-mail addresses:
| Mark J. Schervish | mark@stat.cmu.edu |
| Teddy Seidenfeld | teddy@stat.cmu.edu |
| Joseph B. Kadane | kadane@stat.cmu.edu |
Related Web Sites
CMU Stats. Tech Report 660 "Two Measures of Incoherence: How not to Gamble if you must."