Operations research
5 things
4 Decision Rules When You Can't Predict
4 decision rules for when you have no idea what will happen
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Lesson notes
Key points
- Maximax: the optimist: Pick the option whose best possible payoff is the highest of all.
- Maximin: the pessimist: Pick the option whose worst possible payoff is the least bad.
- Laplace: equal chances: Treat every state as equally likely, then choose the highest average payoff.
- Minimax regret: Build a regret table, then choose the option with the smallest maximum regret.
Takeaway: Optimist, pessimist, average, regret: four ways to decide blind.
Quick check: Which decision rule chooses the option with the best worst-case payoff?
- Maximax
- Maximin
- Laplace
Maximin protects you by maximising the minimum payoff.
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