Laplace Principle

Laplace proposed a simple decision-making principle for those cases where no probability of occurrence of possible effects is available and where assumptions do not make sense. It recommended that in such cases all possible effects should be considered and taken into account with the same probability of occurrence. The decision is then taken on the option that would have the most favourable effect under these conditions.

Although the Laplace principle is easy to apply, its application is fraught with great risks because it equates the probability of occurrence across the board, which, in fact, will not be the case in most cases. But in the absence of any other option, it makes sense to apply the Laplace principle in such situations of total uncertainty.

If the focus of your interest is not on maximizing profits, but on minimizing losses, it is recommended to apply the Regret principle.


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