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Relative Minimax

Daniele Terlizzese
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Daniele Terlizzese: Bank of Italy and EIEF

No 804, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: To achieve robustness, a decision criterion that recently has been widely adopted is Wald's minimax, after Gilboa and Schmeidler (1989) showed that (one generalisation of) it can be given an axiomatic foundation with a behavioural interpretation. Yet minimax has known drawbacks. A better alternative is Savage's minimax regret, recently axiomatized by Stoye (2006). A related alternative is relative minimax, known as competitive ratio in the computer science literature, which is appealingly unit free. This paper provides an axiomatisation with behavioural content for relative minimax.

Date: 2008, Revised 2008-05
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