# Maximax Rule

Another approach tries to work without any assumptions about probability in cases of ignorance. Within this approach, several rules might be adopted. One possibility is the maximax rule, which tells you to choose the op- tion whose best outcome is better than the best outcome of any other option. If you follow the maximax rule, then you will accept the job with the Wye Company, because the best outcome of that job is a salary of \$30,000 when this new company does not go bankrupt, and this is better than any outcome with the Exe Company. Optimists and risk takers will favor this rule.

Other people are more pessimistic and tend to avoid risks. They will favor a rule more like the maximin rule, which says to choose the option whose worst outcome is better than the worst outcome of any other option. If you follow the maximin rule, you will accept the job with the Exe Company, because the worst outcome in that job is a steady salary of \$20,000, whereas the worst out- come is unemployment if you accept the job with the Wye Company.

Don't use plagiarized sources. Get Your Custom Essay on
Maximax Rule
Just from \$13/Page

Each of these rules works by focusing exclusively on part of your infor- mation and disregarding other things that you know. The maximax rule con- siders only the best outcomes for each option—the best-case scenario. The maximin rule pays attention to only the worst outcome for each option—the worst-case scenario. Because they ignore other outcomes, the maximax rule strikes many people as too risky (since it does not consider how much you could lose by taking a chance), and the maximin rule strikes many people as too conservative (since it does not consider how much you could have gained if you had taken a small risk).

Another problem is that the maximax and maximin rules do not take probabilities into account at all. This makes sense when you know nothing about the probabilities. But when some (even if limited) information about probabilities is available, then it seems better to use as much information as you have. Suppose, for example, that each of two options might lead to dis- aster, and you do not know how likely a disaster is after either option, but you do know that one option is more likely to lead to disaster than another. In such situations, some decision theorists argue that you should choose the option that minimizes the chance that any disaster will occur.