First Order Uncertainty


Health Economics

  • This is the idea in probability theory that, although you may not be in any doubt that a head is a head and a tail a tail, you will be in doubt as to which of them a throw of a fair coin will generate. If you doubt the fairness of the coin, then that is a type of second order uncertainty. First order uncertainty refers to variability in data and is reflected in the standard deviation and variance ; second order uncertainty refers to uncertainty about parameter values and is reflected in the standard error.