Maximin, maximax and minimax regret are three approaches to decision making under uncertainty.

  1. The maximax rule involves selecting the alternative that maximises the maximum payoff available.

The manager who employs the maximax criterion is a risk-taker.

  1. The maximin rule involves selecting the alternative that maximises the minimum pay-off achievable.

This approach would be appropriate for a pessimist who seeks to achieve the best results if the worst happens.

Risk-averse

  1. The minimax regret strategy is the one that minimises the maximum regret. It is useful for a risk-neutral decision maker. Essentially, this is the technique for a ‘sore loser’ who does not wish to make the wrong decision.

‘Regret’ in this context is defined as the opportunity loss through having made the wrong decision.