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Minimax regret with imperfect ex-post knowledge of the state

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  • Bonanno, Giacomo

Abstract

We consider decision problems under complete ignorance and extend the minimax regret principle to situations where, after taking an action, the decision maker does not necessarily learn the state of the world. For example, if the decision maker only learns what the outcome is, then all she knows is that the actual state is one of the (possibly several) states that yield the observed outcome under the chosen action. We refer to this situation as imperfect ex-post information. We show that, given a choice between more information and less information, the decision maker prefers the latter. We also extend the framework to encompass the possibility of less than the extreme degree of pessimism that characterizes the minimax regret criterion.

Suggested Citation

  • Bonanno, Giacomo, 2022. "Minimax regret with imperfect ex-post knowledge of the state," Research in Economics, Elsevier, vol. 76(4), pages 403-412.
    • Handle: RePEc:eee:reecon:v:76:y:2022:i:4:p:403-412
    DOI: 10.1016/j.rie.2022.09.006
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    More about this item

    Keywords

    Regret; Minimax; Information; Pessimism; Hurwicz index;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • D0 - Microeconomics - - General

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