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Flashcards in Decision Making Deck (10)
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1

Decision Criteria

Maximum Benefit
Minimax Regret
Maximax benefit

2

Maximax Benefit

Optimistic
Risk taking
The "highest" maximum benefit
Chose the maximum from the options, then chose the maximum of those

3

Maximin Benefit

Pessimistic
Risk averse
The "highest" minimum benefit
Chose the minimum from the options, then chose the maximum of those

4

Minimax Regret

The "lowest" maximum regret
Opportunity loss for each possible purchase
For each state choose the maximum from the options, then calculate the loss from choosing an alternative
Regret table

5

Hurwicz Criterion

Degree of optimism
Consider best and worst outcome under uncertainty
Optimistic to a degree of a
Pessimistic to a degree of (1-a)
Realistic view

6

Decision Making with probability

Multiply payoff by probability of option occurring

7

Square in a decision tree

Decision Node

8

Circle in a decision tree

Outcome Node

9

Expected Monetary Value (EMV)

Lottery
Expected return
Payoff multiplied by probability

10

Von Neumann-Morgenstern

the optimal decision will be the one that maximises the expected value of the utility (i.e., satisfaction)
1) Most favourable and least favourable
2) Determine the P for all over outcomes that makes them indifferent
3) Reduce compound lottery to simple lottery
4) Chance of receiving most favourable outcome