If the decision maker has no knowledge about the likelihood of any of the states of nature occurring,then it can be stated that the decision maker is making decisions under _____.
A)certainty
B)uncertainty
C)risk
D)optimism
E)pessimism

Question

Quizplus · Accepted Answer

When the decision maker has no knowledge about the likelihood of any of the states of nature occurring, it means that they are making decisions under uncertainty. Certainty refers to a situation where the decision maker knows with certainty the outcome of each possible decision. Risk refers to a situation where the decision maker has incomplete but some knowledge about the likelihood of the states of nature occurring. Optimism and pessimism are outlooks or attitudes and not related to decision-making under uncertainty.

If the Decision Maker Has No Knowledge About the Likelihood