Decision making under interval uncertainty: toward (somewhat) more convincing justifications for Hurwicz optimism-pessimism approach

Author:

Chinnakum Warattaya,Berrout Ramos Laura,Iyiola Olugbenga,Kreinovich Vladik

Abstract

Purpose In real life, we only know the consequences of each possible action with some uncertainty. A typical example is interval uncertainty, when we only know the lower and upper bounds on the expected gain. A usual way to compare such interval-valued alternatives is to use the optimism–pessimism criterion developed by Nobelist Leo Hurwicz. In this approach, a weighted combination of the worst-case and the best-case gains is maximized. There exist several justifications for this criterion; however, some of the assumptions behind these justifications are not 100% convincing. The purpose of this paper is to find a more convincing explanation. Design/methodology/approach The authors used utility approach to decision-making. Findings The authors proposed new, hopefully more convincing, justifications for Hurwicz’s approach. Originality/value This is a new, more intuitive explanation of Hurwicz’s approach to decision-making under interval uncertainty.

Publisher

Emerald

Reference7 articles.

1. Hurwicz, L. (1951), “Optimality criteria for decision making under ignorance”, Cowles Commission Discussion Paper, Statistics, No. 370.

2. Decision making under interval uncertainty (and beyond),2014

3. Decision making beyond arrow’s ‘impossibility theorem’, with the analysis of effects of collusion and mutual attraction;International Journal of Intelligent Systems,2009

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