Median-Based Rules for Decision-Making Under Complete Ignorance
17 Pages Posted: 14 Dec 2017
Date Written: October 12, 2017
This paper characterizes a class of rules for decision-making when an agent knows the possible states of the world and the outcome of each of 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 she is under the Rawlsian “veil of ignorance”.
Keywords: Complete Ignorance, Median-Based Rules, Median Outcome, Non-Probabilistic Uncertainty
JEL Classification: D81
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