Minimax regret method -decision making under uncertainty, Mathematics

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MINIMAX regret method

Minimax method assumes that the decision maker will experience 'regret' after he has made the decision and the events have happened. The decision maker chooses the alternative which minimizes the maximum possible regret.

Illustration

Regret table in £ 000's

 

Boom condition

Steady state

Recession

Mini regret  row maxima

Product A

8

5

22

22

Product B

18

0

0

18

Product C

0

6

38

38

 

A regret table is constructed based upon the pay off table. The regret is the 'opportunity losses from taking one decision given that a specific contingency happens in our illustration where there is boom steady state or recession

The ranking by using MINIMAX regret method = BAC

 

 


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