Second Order Uncertainty

Definition

Health Economics

  • You will not be in any doubt that a head is a head and a tail a tail but you will be in doubt as to which a throw of a fair coin will show (first order uncertainty). If you do in fact doubt the fairness of the coin, then that is 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.
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