Laplace Principle

Laplace proposed a simple decision principle for such cases where no probabilities of occurrence of possible effects are available and assumptions also make no sense. He recommended that in these cases all possible effects should be included and considered with equal probabilities of occurrence. The decision is then made for the option whose choice would have the most favorable effect under these conditions. While Laplace’s principle is easy to apply, its application is fraught with great risk because the probabilities of occurrence are equated across the board, which in fact will not be the case in most situations. But in the absence of any other option, the application of Laplace’s principle is reasonable in such situations of complete uncertainty.

If the main focus of your interest is not profit maximization but loss minimization, it is recommended to apply the Regret Principle.


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