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Regret Theory

Regret Theory - by Ahmed Aseeri October 5 2009 PLANNING...

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Unformatted text preview: by Ahmed Aseeri October 5, 2009 PLANNING PLANNING UNDER UNCERTAINTY UNDER UNCERTAINTY REGRET THEORY REGRET THEORY MINIMAX REGRET ANALYSIS MINIMAX REGRET ANALYSIS It’s a feeling… … measurable . MINIMAX REGRET ANALYSIS MINIMAX REGRET ANALYSIS ( 29 s s s ternative Chosen Al ofit from native Best Alter ofit from - = Pr Pr Regret If chosen decision is the best Zero regret Nothing is better than the best No negetive Regret MINIMAX REGRET ANALYSIS MINIMAX REGRET ANALYSIS Motivating Example s 1 High s 2 Medium s 3 Low Average A 19 14 -3 10 B 16 7 4 9 C 20 8 -4 8 D 10 6 5 7 Max 20(C) 14(A) 5(D) 10(A)-5 5 10 15 20 1 2 3 $Million s 1 s 2 s 3 A C B D Traditional way Maximize Average … select A Optimistic decision maker MaxiMax … select C Pessimistic decision maker MaxiMmin … select D MINIMAX REGRET ANALYSIS MINIMAX REGRET ANALYSIS Motivating Example Calculate regret: find maximum regret A … regret = 8 @ low market C … regret = 9 @ low market D … regret = 10 @ high market...
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Regret Theory - by Ahmed Aseeri October 5 2009 PLANNING...

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