Maximin Principle According to John von Neumann

The maximin principle can be used to optimize a decision under worst-case assumptions.

You can achieve a maximin decision by considering for each of your own possible decision options the constellation that leads to the worst payoff in each case. These are the worst cases. Then, among these worst possible constellations, one decides on the decision option for which the worst payoff in each case is relatively the highest. The charm of the maximin principle lies in the fact that the selection of the maximin strategy can be carried out on the basis of the preference sequence; absolute values are not required. This makes the maximin principle relevant for business practice and easy to handle.

Example: The maximin principle according to John von Neumann is useful when it is already clear that you cannot win. By applying the maximin principle, the best options can be selected at least for the worst case, which is expected to occur. These considerations are not usually made in practice, but they can help to mitigate the consequences.

If there are no indications of concrete probabilities of occurrence for alternative scenarios, it is advisable to apply the Laplace Principle.


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