The decision-criterion in which a decision-maker selects an alternative that maximizes \(H\) (criterion of realism) \(= [a \times (\text{maximum in column})] + [(1 - a) \times (\text{minimum in column})]\) is called
Hurwicz criterion
This is a decision-making-under-uncertainty problem, and the formula in the question is the signature of one particular criterion.
The criterion of realism recognises that a pure optimist and a pure pessimist both go too far, so it blends the best and the worst payoff of each alternative using a coefficient of optimism \(a\) that lies between 0 and 1. For each alternative it computes \(H = a \times (\text{maximum payoff}) + (1 - a) \times (\text{minimum payoff})\) and then chooses the alternative with the highest \(H\). This weighted blend of optimism and pessimism is exactly the Hurwicz criterion.
The other rules use different logic: the Laplace criterion assumes all states are equally likely and picks the alternative with the best simple average of payoffs; Wald's maximin looks only at each alternative's worst payoff and maximises that (pure pessimism); and the Bayesian (expected-value) criterion attaches probabilities to the states and maximises expected payoff.
Since the given formula weights only the maximum and minimum with \(a\) and \(1-a\), it identifies the Hurwicz rule.
Hence the criterion described is the Hurwicz criterion.
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Important Questions from Decision Making
- Who pioneered the concept of "Fight or Flight situation" as stress survival trait ?
- An economic decision in the family deals with :
(i) Multiple goals
(ii) Single goal
(iii) Multiple values
(iv) Scarce resources
code : - Match List – I with List – II and indicate your answer by using the codes given below :
List - I
(Concept)List - II
(Description)p. Heuristics 1. Judgements made on the basis of specific kind of information that can be brought to mind. q. Representative Heuristics 2. Tendency to use a number of value as a starting point to whom one adopts. r. Availability Heuristics 3. Simple rules for drawing inferences in a rapid and effortless manner. s. Anchoring and Adjustment Heuristics 4. Judgements made on the basis of resemblance of current stimuli to other stimuli.
Codes: - Arrange in correct sequence the steps involved in decision-making :
I. Selecting the best alternative
II. Identifying the problem
III. Searching alternative solutions
IV. Thinking through alternatives
V. Feedback - Arrange in proper sequence the steps involved in problem solving stage :
(a) Obtaining relevant information
(b) Selecting the best course
(c) Formulating possible course of action
(d) Identifying the problem
