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Flexibility and real options analysis in emergency medical services systems using decision rules and multi-stage stochastic programming

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  • Zhang, Sizhe
  • Cardin, Michel-Alexandre

Abstract

A novel approach to EMS infrastructure systems design, planning, and operations under long-term uncertainty is introduced based on multi-stage stochastic programming and decision rules, accounting for strategic flexibility (also known as real options – RO). Different from standard RO analysis, the approach mimics real-world decision-making by exercising flexibility based on conditional-go decision rules. The objective is to minimize the expected total costs over the system’s life cycle, and the outputs are the optimal initial configuration and decision rules. A flexible solution provides lower expected cost than stochastically optimal rigid solutions, especially valuable when required incident coverage rate is >95%.

Suggested Citation

  • Zhang, Sizhe & Cardin, Michel-Alexandre, 2017. "Flexibility and real options analysis in emergency medical services systems using decision rules and multi-stage stochastic programming," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 107(C), pages 120-140.
    • Handle: RePEc:eee:transe:v:107:y:2017:i:c:p:120-140
    DOI: 10.1016/j.tre.2017.09.003
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