Minimax Regret Criterion : Under this criterion the decision maker identifies the
maximum regrates for each act and selects the act which minimizes there maximum
regret values. This is done by selecting the act due to which maximum regret is
minimum. This is one of the order to make decision using this criterion first we have
to convert pay – off table into opportunity lost table or regret table. Regret values of
each action is obtained by sub – tracing pay – off of that action from best pay – off for
given state of nature.
To illustrate this criterion consider following pay – off table.
Course of Action (Pay off)
|
State |
A1 |
A2 |
A3 |
A4 |
|
S1 |
– 40 |
– 80 |
– 120 |
– 160 |
|
S2 |
5 |
– 35 |
– 75 |
– 115 |
|
S3 |
5 |
10 |
– 30 |
– 75 |
|
S4 |
5 |
10 |
15 |
20 |
Opportunity Loss Table
|
State |
A1 |
A2 |
A3 |
A4 |
|
S1 |
0 |
40 |
80 |
120 |
|
S2 |
0 |
40 |
80 |
120 |
|
S3 |
5 |
0 |
40 |
85 |
|
S4 |
15 |
10 |
5 |
0 |
|
Max Regret |
15 |
40 |
80 |
120 |
Chose the min {15,40,80,120} = 15 (belongs to A)
Thus using minimax regret criterion choose A1
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