ADM 2302 Lecture Notes - Lecture 16: Emv, Perfect Information, Decision Analysis
6 Jan 2018
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Decision making under certainty: the decision maker knows for sure the payo for every decision alternative. Decision making under risk: the decision maker has some knowledge regarding the probability of each possible outcome. Decision making under uncertainty: the decision maker has no knowledge even of the probability of each possible outcome. > decision making methods: maximax, maximin, criterion of realism, equally likely, minimax regret. > minimax regret nds the alternative that minimizes the maximum opportunity loss within each alternative. > first develop the opportunity loss (regret) table that is de ned as the di erence between optimal payo and the actual payo received for any given state of nature . > it"s the amount lost by not picking the best alternative. There will never be a negative value in a regret table. Regret or opportunity loss measures how much better we could have done. We want to minimize the amount of regret we might experience.
