I2SDS Seminars: Fall 2013

On Aggregating Probabilistic Information: The Wisdom of (and Problem with) Crowds

Research related to the wisdom of crowds has often shown that aggregation of forecasts through linear opinion pools can provide a much better point estimate of unknown quantities than individual experts/forecasters. We examine how well this idea is translated when dealing with probability forecasts.


Simple Priors for Variance Components: Bayesian Applications of the Root-Uniform Distribution

Recent work has shown that the use of the previously-common Gamma distribution as a non-informative prior for variance components in Bayesian hierarchical models can actually be informative and lead to overly small random effects. As a result, alternatives to the Gamma distribution such as the uniform distribution, the folded noncentral t distribution, and the half-Cauchy distribution are now more prevalent. We introduce the root-uniform distribution as a simple flexible prior distribution for this context.


Wine Futures and Advance Selling under Quality Uncertainty

This paper examines the use of wine futures and advance selling as a form of operational flexibility to mitigate quality rating risk in wine production. At the end of a harvest season, the winemaker obtains a certain number of barrels of wine that can be produced for a particular vintage. After one more year of aging, the wine is bottled, and the reviewers provide another review of the wine, and assign a bottle score that influences the market price of the wine. Advance selling in the form of wine futures offers several benefits to the winemaker. It enables the firm to pass on the risk of holding inventory that is uncertain in value to the consumers.


Simple Priors for Variance Components: Bayesian Applications of the Root-Uniform Distribution

Recent work has shown that the use of the previously-common Gamma distribution as a non-informative prior for variance components in Bayesian hierarchical models can actually be informative and lead to overly small random effects. As a result, alternatives to the Gamma distribution such as the uniform distribution, the folded noncentral t distribution, and the half-Cauchy distribution are now more prevalent. We introduce the root-uniform distribution as a simple flexible prior distribution for this context. The rootuniform generalizes the uniform distribution and has appealing properties.