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Adaptive partial policy innovation: coping with ambiguity through diversification

Author

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  • Charles F. Manski

    (Institute for Fiscal Studies and Northwestern University)

Abstract

This paper develops a broad theme about policy choice under ambiguity through study of a particular decision criterion. The broad theme is that, where feasible, choice between a status quo policy and an innovation is better framed as selection of a treatment allocation than as a binary decision. Study of the static minimax-regret criterion and its adaptive extension substantiate the theme. When the optimal policy is ambiguous, the static minimax-regret allocation always is fractional absent large fixed costs or deontological considerations. In dynamic choice problems, the adaptive minimax-regret criterion treats each cohort as well as possible, given the knowledge available at the time, and maximizes intertemporal learning about treatment response.

Suggested Citation

  • Charles F. Manski, 2008. "Adaptive partial policy innovation: coping with ambiguity through diversification," CeMMAP working papers CWP10/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:10/08
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    File URL: http://cemmap.ifs.org.uk/wps/cwp1008.pdf
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    References listed on IDEAS

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    1. Charles F. Manski, 2006. "Search Profiling With Partial Knowledge of Deterrence," Economic Journal, Royal Economic Society, vol. 116(515), pages 385-401, November.
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    Cited by:

    1. William A. Brock & Charles F. Manski, 2008. "Competitive Lending with Partial Knowledge of Loan Repayment," NBER Working Papers 14378, National Bureau of Economic Research, Inc.
    2. Charles F. Manski, 2008. "Partial Prescriptions For Decisions With Partial Knowledge," NBER Working Papers 14396, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H0 - Public Economics - - General

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