Minimax and the value of information

Evan Sadler ()

Theory and Decision, 2015, vol. 78, issue 4, 575-586

Abstract: In his discussion of minimax decision rules, Savage (The foundations of statistics, Dover Publications Inc., Mineola 1954 , p. 170) presents an example purporting to show that minimax applied to negative expected utility (referred to by Savage as “negative income”) is an inadequate decision criterion for statistics; he suggests the application of a minimax regret rule instead. The crux of Savage’s objection is the possibility that a decision maker would choose to ignore even “extensive” information. More recently, Parmigiani (Theor Decis 33:241–252, 1992 ) has suggested that minimax regret suffers from the same flaw. He demonstrates the existence of “relevant” experiments that a minimax regret agent would never pay a positive cost to observe. On closer inspection, I find that minimax regret is more resilient to this critique than would first appear. In particular, there are cases in which no experiment has any value to an agent employing the minimax negative income rule, while we may always devise a hypothetical experiment for which a minimax regret agent would pay. The force of Parmigiani’s critique is further blunted by the observation that “relevant” experiments exist for which a Bayesian agent would never pay. I conclude with a discussion of pessimism in the context of minimax decision rules. Copyright Springer Science+Business Media New York 2015

Keywords: Minimax regret; Ultrapessimism (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11238-014-9442-3 (text/html)
Access to full text is restricted to subscribers.

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:kap:theord:v:78:y:2015:i:4:p:575-586

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11238/PS2

DOI: 10.1007/s11238-014-9442-3

Access Statistics for this article

Theory and Decision is currently edited by Mohammed Abdellaoui

More articles in Theory and Decision from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().