Median-based Rules for Decision-making under Complete Ignorance
Studies in Microeconomics, 2018, vol. 6, issue 1-2, 1-13
Abstract This article characterizes a class of rules for decision-making when an agent knows the possible states of the world and the outcome of each of his/her actions for each state, but does not have any information about the probabilities of the states. The existing literature in this framework has mainly considered â€˜maxâ€™-based or â€˜minâ€™-based rules and their variants. Such rules reflect rather extreme forms of optimism or pessimism on the part of an agent. In contrast, this paper focuses on the median outcome(s) and characterizes a class of decision-making rules which reflects a more â€˜balancedâ€™ attitude towards uncertainty. We also discuss a possible interpretation of our result in terms of the ranking of alternative social states that an individual may have when he/she is under the Rawlsian â€˜veil of ignoranceâ€™. JEL Classifications: D81
Keywords: Complete ignorance; median-based rules; median outcome; non-probabilistic uncertainty (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:miceco:v:6:y:2018:i:1-2:p:1-13
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