A blog from the Maltese Islands (Malta, Gozo, Comino)
Minimax Regret Decision Rule
Decision criterion that focuses on the opportunity loss associated with a decision rather than on its worst possible outcome.
This decision rule, known as the minimax regret criterion states that the decision maker should minimise the maximum possible regret associated with a wrong decision after the fact. This criterion instructs one to minimise the difference between possible outcomes and the best outcome for each state of nature.
In game theory, opportunity loss is defined as the difference between a given payoff and the highest possible payoff for the resulting state of nature.
Opportunity losses result because returns actually received under conditions of uncertainty are frequently lower than the maximum return that would have been possible had perfect knowledge been available beforehand.