Regret in Treatment Choice when Welfare varies with an Uncertain Event: The Prediction-Threshold Problem (opens in new tab)

We study the maximum regret (MR) of binary treatment choice in a population with observed covariates x, when welfare varies with an uncertain binary event. We study decision making with plug-in probabilistic predictions of the event and pre-specified decision thresholds, which we term the prediction-threshold problem. In this setting, the optimal treatment for persons with covariate value x is B if the conditional probability P(y = 1|x) of a...