Cover: Subjective Probability Distribution Elicitation in Cost Risk Analysis

Subjective Probability Distribution Elicitation in Cost Risk Analysis

A Review

Published Jul 1, 2007

by Lionel A. Galway


Download eBook for Free

Full Document

FormatFile SizeNotes
PDF file 0.2 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Summary Only

FormatFile SizeNotes
PDF file 0.1 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.


Purchase Print Copy

 Format Price
Add to Cart Paperback36 pages $20.00

A cost estimate for a project such as the acquisition of a new aircraft or satellite system carries with it an inherent probability that the actual cost will exceed the estimate — that changes in requirements, technology, the economic environment, and a multitude of other factors that may occur over the life of the project will change the final cost. One major approach to cost risk analysis — the evaluating and quantifying of the uncertainty of a cost estimate — has been probabilistic: expressing the uncertainty in a cost estimate as a probability distribution over a range of potential costs. Cost analysts in industry and government and researchers in statistics and management have often proposed that, to get probability distributions for platforms using new and untried technologies, expert judgment should be tapped and subjective probability distributions elicited from the experts to represent cost uncertainty.

This technical report reviews procedures for eliciting subjective probability distributions in cost risk analysis, both in the cost risk field and in other disciplines in which elicitation has been a topic of research — primarily, statistics and psychology. Because of a lack of empirical work in elicitation, especially in cost risk, the author also interviewed a number of senior people in the cost risk community, who gave insight into the practices of the field.

This report should be of interest to cost analysis professionals who wish to quantify uncertainty when using expert opinions in cost risk analysis.

Research conducted by

The research described in this report was sponsored by the United States Air Force and conducted by RAND Project AIR FORCE.

This report is part of the RAND technical report series. RAND technical reports may include research findings on a specific topic that is limited in scope or intended for a narrow audience; present discussions of the methodology employed in research; provide literature reviews, survey instruments, modeling exercises, guidelines for practitioners and research professionals, and supporting documentation; or deliver preliminary findings. All RAND reports undergo rigorous peer review to ensure that they meet high standards for research quality and objectivity.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.