Decision Theory W6

Question 1

What is the Maximax Rule and When does it break down

Answer 1

Maximising the maximum possible outcome

select the decision that has the highest maximum payoff

breaks down when utility differences or probabilities matter

Question 2

What is the Minimax Rule and When does it break down

Answer 2

focuses on minimising the maximum regret

for each decision calculate the regret by finding the difference between the maximum payoff of each possible outcome and the payoff actually achieved

pick the decision which has the smallest maximum regret

breaks down with the involvement of dependence on relevant outcomes

Question 3

What is the Maximin Rule and When does it break down?

Answer 3

focuses on the highest minimum payoff

for each decision, determine the minimum possible pay off among all the outcomes

select the decision that has the highest minimum payoff

breaks down when utility differences or probabilities matter

Question 4

what is strong dominance

Answer 4

an act A strongly dominates an Act B if A is better than B at every state

Question 5

what is weak dominance

Answer 5

an act A weakly dominates an Act B if A is at least as good as B at every state and better than B at some state

Question 6

what is the dominance principle

Answer 6

never take dominated acts