Bayesian updating for binary variables: an application in the UK water industry
Michail Papathomas, Roger J. Hocking · Journal of the Royal Statistical Society Series D (The Statistician) · 2003
Summary. In accordance with the regulation of the privatized English and Welsh water industry, water companies are required to submit an asset management plan every few years. A requirement of South West Water's asset management planning is to state the probability that some of its assets will need refurbishment or replacement within the following 5 years. Probability assessments are elicited for the company's assets based on information of varying quality. For the formulation and updating of beliefs we propose and employ the threshold model, a Bayesian updating procedure. The model's main aspect is Jeffrey's conditionalization. This is an updating rule based on a simple conditional independence assumption. According to this rule, it is not necessary to construct a fully specified joint density for the quantities of interest and the probability assessments.