Decisions with Uncertain Consequences—A Total Ordering on Loss-Distributions

Stefan Rass, Sandra König and Stefan Schauer

PLOS ONE, 2016, vol. 11, issue 12, 1-23

Abstract: Decisions are often based on imprecise, uncertain or vague information. Likewise, the consequences of an action are often equally unpredictable, thus putting the decision maker into a twofold jeopardy. Assuming that the effects of an action can be modeled by a random variable, then the decision problem boils down to comparing different effects (random variables) by comparing their distribution functions. Although the full space of probability distributions cannot be ordered, a properly restricted subset of distributions can be totally ordered in a practically meaningful way. We call these loss-distributions, since they provide a substitute for the concept of loss-functions in decision theory. This article introduces the theory behind the necessary restrictions and the hereby constructible total ordering on random loss variables, which enables decisions under uncertainty of consequences. Using data obtained from simulations, we demonstrate the practical applicability of our approach.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0168583 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 68583&type=printable (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0168583

DOI: 10.1371/journal.pone.0168583

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().