Modelplasticity and abductive decision making

Subhadeep Mukhopadhyay ()
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Subhadeep Mukhopadhyay: United Analytics and Computational Intelligence, Inc.

Decisions in Economics and Finance, 2023, vol. 46, issue 1, No 8, 255-276

Abstract: Abstract ‘All models are wrong but some are useful’ Box (Robustness in statistics, Elsevier, pp 201–236, 1979). But, how to find those useful ones starting from an imperfect model? How to make informed data-driven decisions equipped with an imperfect model? These fundamental questions appear to be pervasive in virtually all empirical fields—including economics, finance, marketing, healthcare, climate change, defense planning, and operations research. This article presents a modern approach (builds on two core ideas: abductive thinking and density-sharpening principle) and practical guidelines to tackle these issues in a systematic manner.

Keywords: Abductive decision-making; Model risk management; The uncertainty principle; Density-sharpening principle; Creation of new knowledge; Quantile decision analysis (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10203-023-00390-5

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