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Wednesday, December 05, 2018

What is sure thing principle in decision theory?

his refers to a logical principle which states that it is unnecessary to consider uncertainties while making a decision if these uncertainties will not affect the eventual decision taken by a person in any way. If an investor, for instance, will buy a stock regardless of the earnings of a company, it makes no sense to worry about whether it will report a profit or a loss. It is used to emphasise the point that it may be a waste of effort to consider the probability of various uncertain events if these events are effectively irrelevant to the final decision. The principle was proposed by American statistician Leonard Jimmie Savage in his 1954 book The Foundations of Statistics.

Source: The Hindu, 5/12/2018