ACCA Performance Management (F5) Certification Practice Exam

In decision-making, the maximax rule is often used by which type of individual?

1. Risk-neutral

2. Risk-taker

3. Risk-averse

4. Conservative

The correct answer is: Risk-taker

The maximax rule is utilized primarily by individuals who are characterized as risk-takers. This decision-making approach focuses on identifying the alternative with the maximum possible payoff, reflecting an optimistic and aggressive stance towards risk. A risk-taker is willing to accept higher levels of uncertainty and is inclined to pursue options that could yield the highest rewards, even if those options also carry a significant potential for loss. Additionally, this rule stands in contrast to the strategies adopted by risk-averse or conservative individuals, who would typically lean towards minimizing potential losses rather than maximizing potential gains. Risk-neutral individuals, meanwhile, are indifferent between options with different levels of risk and would weigh both the potential gains and losses equally. In summary, the maximax rule aligns with a proactive and optimistic approach to decision-making found in risk-takers, effectively illustrating their preference for options that promise the highest possible rewards.