Which of the following is a drawback of the Laplace criterion?
A)It ignores the payoffs associated with the "high demand" state of nature.
B)It ignores the payoffs associated with the "low demand" state of nature.
C)It is not a good method to use when the states of nature are not equally probable.
D)It ignores the maximum payoff that could be realized if the decision maker were a risk taker and the probabilities associated with the possible state of nature.

Question

Quizplus · Accepted Answer

The Laplace criterion assumes that all states of nature are equally probable, which is a significant drawback when this is not the case. It does not adjust for the actual probabilities of different states occurring, potentially leading to suboptimal decisions when probabilities are known and significantly vary.

Which of the Following Is a Drawback of the Laplace