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Decisions Under Uncertainty (Decisiones Bajo Incertidumbre)

48 Pages Posted: 16 May 2007  

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: October 20, 2003

Abstract

This is a course material from the book Managerial Decision Making Under Risk and Uncertainty. The book is originally in Spanish and is untitled as Decisiones empresariales bajo riesgo e incertidumbre. The level of the book is basic. We use very few mathematics and it is expected to be used by managers.

In this third chapter we deal with the idea of uncertainty (not having a probability distribution assigned to the events). We use the basic ideas of game theory to introduce the reader into the strategies when dealing with uncertainty. We illustrate the different approaches in game theory: minimax, maxmax, minimum regret, Laplace method, etc. We also present a simple method to estimate the probability of an outcome and one method to estimate a subjective probability distribution.

Notes: Downloadable document is in Spanish

Keywords: Uncertainty, game theory, subjective probability distributions

JEL Classification: G31

Suggested Citation

Velez-Pareja, Ignacio, Decisions Under Uncertainty (Decisiones Bajo Incertidumbre) (October 20, 2003). Available at SSRN: https://ssrn.com/abstract=986876 or http://dx.doi.org/10.2139/ssrn.986876

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

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