Decision-based model selection

A key step in data-driven decision making is the choice of a suitable mathematical model. Complex models that give an accurate description of reality may depend on many parameters that are difficult to estimate; in addition, the optimization problem corresponding to such models may be computationally intractable and only approximately solvable. Simple models with only a few unknown parameters may be misspecified, but also easier to estimate and optimize. With such different models and some initial data at hand, a decision maker would want to know which model produces the best decisions. In this paper we propose a decision-based model-selection method that addresses this question.