Statistical decision functions with judgment

Simone Manganelli

Journal of Economic Theory, 2025, vol. 223, issue C

Abstract: A decision maker tests whether the gradient of the loss function evaluated at a judgmental decision is zero, for a given level of significance. If the test does not reject, the decision maker selects the judgmental decision. If the test rejects, the decision maker chooses the action whose gradient is at the boundary of the rejection region. The test is admissible and asymptotically most powerful. The level of significance reflects the decision maker's attitude toward uncertainty. The decision rule is applied to a problem of asset allocation.

Keywords: Statistical decision theory; Hypothesis testing; Confidence intervals; Ambiguity (search for similar items in EconPapers)
JEL-codes: C1 C12 C13 C18 D81 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:223:y:2025:i:c:s0022053124001467

DOI: 10.1016/j.jet.2024.105940

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