DECISIONS UNDER UNCERTAINTY

BEN BLUMSON

Definition 1 (Dominance). A choice weakly dominates another if and only if

its consequences are at least as preferred in every outcome. A choice strictly
dominates another if and only if its consequences are strictly preferred in
every outcome.1

Example 1. You are looking for a job as an accountant. You know for sure
you can get a job at P W C, but you doubt whether you can get the job at
EY . There are no costs to applying for either job, or to turning down an
offer if you get both. Q: What should you do? A: You should apply to both,
since that weakly dominates applying to one.

Example 2. You want toast for breakfast, and you prefer avocado toast
to kaya toast, and you prefer kaya toast to vegemite toast. You are certain
that you can get kaya toast at Ya Kun, but you’re not sure whether you
can get avocado toast at Jimmy Monkey, or if they will only have vegemite.
Jimmy Monkey is far from Ya Kun, so you can’t go to both.

Definition 2 (The maximin principle). For each act, look at its worst pos-
sible consequences. Then choose the act which has the least bad worst
consequence.2 There is also a lexicographic version of this principle, which
breaks ties between least bad consequences by looking at the next least bad.3

Date: September 8, 2021.

1
See for example Resnik 1987, p. 25 or Peterson 2009, pp. 41–2.
2See for example Resnik 1987, p. 26 or Peterson 2009, p. 43.

3See for example Resnik 1987, p. 26 and Peterson 2009, p. 45.

1
2 BEN BLUMSON

Example 3 (The Veil of Ignorance4). You are deciding what kind of society
you will be born into. Some societies are very wealthy, but the wealth is
distributed very unevenly. Other societies are less wealthy, but more egali-
tarian. How does the minimax principle advise you to make this tradeoff?
What does the maximin principle advise you to do if you can take $1 from
the poorest person in order to give $1, 000, 000, 000 to each other person?
What does classical decision theory, also known as maximizing expected
utility, recommend in the same situations?

Definition 3 (The minimax regret rule). The maximum regret in an out-

come is the difference between the utility of the best and worst consequences
in that outcome. The minimax regret rule says to choose the act with the
least maximum regret.5

References

Harsanyi, John C. (1953). “Cardinal Utility in Welfare Economics and in the

Theory of Risk-Taking”. Journal of Political Economy 61.5, pp. 434–435.
doi: 10.1086/257416.
– (1975). “Can the Maximin Principle Serve as a Basis for Morality? A
Critique of John Rawls’s Theory”. The American Political Science Review
69.2, pp. 594–606. doi: 10.2307/1959090. JSTOR: 1959090.
Peterson, Martin (2009). “Decisions under Ignorance”. An Introduction to
Decision Theory. Cambridge: Cambridge University Press, pp. 40–63. doi:
10.1017/CBO9780511800917.004.
Rawls, John (1971). “The Original Position”. A Theory of Justice. Harvard
University Press, pp. 102–168. doi: 10.2307/j.ctvkjb25m.7. JSTOR:
j.ctvkjb25m.7.
Resnik, Michael D. (1987). Choices: An Introduction to Decision Theory.
University of Minnesota Press. JSTOR: 10.5749/j.ctttshgd.
4See Harsanyi 1953, Rawls 1971 and Harsanyi 1975.

5See Resnik 1987, pp. 30–2 and Peterson 2009, pp. 49–3.