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Multiobjective investment planning under uncertainty

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  • Caplin, DA
  • Kornbluth, JSH

Abstract

In this paper we consider the relevance of various planning methods and decision criteria to multiobjective investment planning under uncertainty. Assuming that a natural reaction to uncertainty is to operate so as to leave open as many good options as possible (as opposed to maximizing subjective expected utility) we argue that the planning process should concentrate on analyzing the effects of the initial decision, and that for this exercise the classical methods of mixed integer programming are inappropriate. We demonstrate how the technique of dynamic programming can be extended to take account of multiple objectives and use dynamic programming as a framework in which we analyze the robustness of an initial decision in the face of various types of uncertainty. In so doing we also analyze the risks involved in both the planning and decision making functions.

Suggested Citation

  • Caplin, DA & Kornbluth, JSH, 1975. "Multiobjective investment planning under uncertainty," Omega, Elsevier, vol. 3(4), pages 423-441, August.
    • Handle: RePEc:eee:jomega:v:3:y:1975:i:4:p:423-441
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    Cited by:

    1. A A Namen & C T Bornstein & J Rosenhead, 2009. "Robustness analysis for sustainable community development," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(5), pages 587-597, May.
    2. Gross, Eitan, 2016. "On the Bellman’s principle of optimality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 217-221.
    3. H-Y Wong, 2007. "Using Robustness Analysis to structure online marketing and communication problems," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(5), pages 633-644, May.

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