Mini Max Regret Part II

Sometimes the mathematical formulas can be intimidating.  Minimizing your maximum regret is about making a decision. There are many types of decision tools, but one of the easiest is a decision table. 

We make decisions everyday based on this table, for instance:  You are looking for an address; you are at an intersection where you must turn left or right.  On the Right is farm land for about 2 miles and then some homes, on the Left about a mile is a small mall.  There are no addresses on the street signs at the intersection where you are and you have no information whether the address is a business or home.  Which way do you go?  If you go right and 5 miles down the road think you are going the wrong way you will have to turn around and go back.  That is a Maximum Regret.  If you go left and think you are going the wrong way, you can stop at the mall and ask directions, and know for certain that you are going the right or wrong way.  That is minimizing your maximum regret.

The above is a simple version, but let’s say things are a little more complicated.  You have a tech firm and need to hire a new tech person.  There are certain things you want them to know, and things they are willing to do or not do.  You have 7 candidates that look good on their resumes and in their first interviews but you don’t want to discriminate by asking each different questions or be taken in by appearance.  So you make a list of questions and assign points to their answers according to your needs.  It would look something like this:

Questions:

1.     Can you lift 30 lbs. (1)

2.     Can you work any day of the week (1)

3.     Will you accept $15 per hour to start (1)

4.     Do you have your own tools (1-3)

5.     Can you supply help over the phone (1-3)

6.     Are you willing to travel overnight (1)

As you can see Sue is the most desirable candidate.  Bob won’t work for 15 dollars, Mary, does not have enough tools or phone experience.  Jose cannot lift 30lbs. Alvin cannot work any day of the week and Sula is has less experience on the phone than Sue.

Of course hiring a person is a lot more complicated than 6 questions, but this is just an example.

This can be applied to buying a house or a car, or even selling on EBay (or not).

Under Minimax Regret this is called a Decision Table.  That is all for now.