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RISK AND UNCERAINTY – MINIMAX RULE

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › RISK AND UNCERAINTY – MINIMAX RULE

  • This topic has 3 replies, 2 voices, and was last updated 1 month ago by LMR1006.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • August 3, 2023 at 10:43 am #689325
    Ayan
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    Hello,

    I watched the minimax rule video on youtube.
    I understood the concept, that is if the decision maker is a risk avoider he tends to choose the best choice among the worst outcome results as per the question which was dealing with possible profits.
    My question is what if you are a risk avoider and you are now dealing with costs instead of possible profits, will you choose the least or highest cost options? And is it from the worst or best outcomes?

    August 3, 2023 at 6:20 pm #689347
    LMR1006
    Keymaster
    • Topics: 0
    • Replies: 293
    • ☆☆☆

    As a risk avoider, when dealing with costs instead of possible profits, you would typically choose the option with the least cost.

    This is because as a risk avoider, you prioritise minimising potential losses or negative outcomes.

    In this case, the worst outcome would be incurring higher costs, so you would choose the option that minimises the potential for higher costs.

    August 7, 2023 at 3:15 pm #689534
    Ayan
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    Well understood, thank you

    August 7, 2023 at 4:27 pm #689541
    LMR1006
    Keymaster
    • Topics: 0
    • Replies: 293
    • ☆☆☆

    You are most welcome

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