Question

For a maximization problem, the conservative approach is often referred to as the

a. minimax approach.
b. maximin approach.
c. maximax approach.
d. minimin approach.

Answer 1

The conservative approach to a maximization problem is referred to as the maximin approach, where the highest minimum payoff is selected.

Step-by-step explanation:

For a maximization problem, the conservative approach is often referred to as the b. maximin approach. This approach implies choosing the option with the highest minimum payoff when faced with uncertainty, which contrasts with the minimax approach that focuses on minimizing the possible losses.

Whereas a maximax strategy would look for the maximum of the maximum payoffs, indicative of a risk-seeking behavior, and the minimin approach would look for the minimum of the minimum payoffs, indicative of extreme risk aversion.