Question

Given below are two statements : one is labelled as Assertion (A) and the other is labelled as Reason (R).

Assertion (A) : Maximax Principle is the most optimistic non-probabilistic criterion for decision making under risk or uncertainty

Reason (R) : In Maximax Principle, the decision maker selects the maximum pay off associated with each course of action and then selects the one with highest value.

In the light of the above statements, choose the most appropriate answer from the options given below :

• A. Both (A) and (R) are correct and (R) is the correct explanation of (A)
• B. Both (A) and (R) are correct but (R) is not the correct explanation of (A)
• C. (A) is correct but (R) is not correct
• D. (A) is not correct but (R) is correct

Hint:

Maximax = maximum of the maximum payoffs, the optimist's rule.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:

• We judge the Assertion and the Reason about the Maximax criterion and then see whether the Reason explains the Assertion.

Step 2: Detailed Explanation:

• Assertion (A): The Maximax criterion is the criterion of an optimist, who expects the best outcome. It uses no probabilities. So (A) is correct.

• Reason (R): Under Maximax the decision maker finds the maximum payoff for each course of action and then picks the action with the highest of these maximum payoffs. This is how the criterion works, so (R) is correct.

• The procedure in (R) is exactly why the criterion is called optimistic, so (R) explains (A).

Step 3: Final Answer:
The correct option is (A).