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Median-based Rules for Decision-making under Complete Ignorance

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  • Aditi Bhattacharyya

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 ‘max’-based or ‘min’-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 ‘balanced’ 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 ‘veil of ignorance’. JEL Classifications: D81

Suggested Citation

  • Aditi Bhattacharyya, 2018. "Median-based Rules for Decision-making under Complete Ignorance," Studies in Microeconomics, , vol. 6(1-2), pages 1-13, June.
    • Handle: RePEc:sae:miceco:v:6:y:2018:i:1-2:p:1-13
    DOI: 10.1177/2321022217744148
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    References listed on IDEAS

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    More about this item

    Keywords

    Complete ignorance; median-based rules; median outcome; non-probabilistic uncertainty;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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