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Unformatted text preview: Subjective Mean and Variance: In many applications, we saw how to make decisions based on objective data; however, an informative decisionmaker might be able to combine his/her subjective input and the two sources of information. Application: Suppose the following information is available from two independent sources: Revising the Expected Value and the Variance Estimate Source Expected value Variance Sales manager 1 = 110 1 2 = 100 Market survey 2 = 70 2 2 = 49 The combined expected value is: [ 1 / 1 2 + 2 / 2 2 ] / [1/ 1 2 + 1/ 2 2 ] The combined variance is: 2 / [1/ 1 2 + 1/ 2 2 ] For our application, using the above tabular information, the combined estimate of expected sales is 83.15 units with combined variance of 65.77....
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 Spring '08
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