IDEAS home Printed from https://ideas.repec.org/a/spr/waterr/v28y2014i12p3921-3935.html
   My bibliography  Save this article

Comparisons of Risk-based Decision Rules for the Application of Water Resources Planning and Management

Author

Listed:
  • Hsin-Ting SU
  • Yeou-Koung Tung

Abstract

Water resources planning and management are plagued with various uncertainties in that any chosen management alternative always has the possibility to be inferior to other competing alternatives. To facilitate risk-based decision making, the minimax expected opportunity loss (EOL) rule is applied for alternative selection. Two existing risk measures as well as EOL are compared and their implications in risk-based decision making are examined. It is shown that EOL can reflect more accurately the relative merit of two competing alternatives without suffering the pessimism and the counter-intuition of the other two risk measures considered herein. The minimax EOL rule is demonstrated through an application to a river basin management decision for improving the navigation. The results show that the correlation between outcomes of competing alternatives and decision maker’s acceptable risk are important in decision making under uncertainty. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Hsin-Ting SU & Yeou-Koung Tung, 2014. "Comparisons of Risk-based Decision Rules for the Application of Water Resources Planning and Management," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(12), pages 3921-3935, September.
    • Handle: RePEc:spr:waterr:v:28:y:2014:i:12:p:3921-3935
    DOI: 10.1007/s11269-014-0718-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11269-014-0718-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11269-014-0718-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Whitmore, G A, 1970. "Third-Degree Stochastic Dominance," American Economic Review, American Economic Association, vol. 60(3), pages 457-459, June.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. Yue-Ping Xu & Yeou-Koung Tung, 2008. "Decision-making in Water Management under Uncertainty," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(5), pages 535-550, May.
    4. Bawa, Vijay S. & Lindenberg, Eric B., 1977. "Abstract: Capital Market Equilibrium in a Mean-Lower Partial Moment Framework," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 635-635, November.
    5. Bonini, Charles P, 1975. "Risk evaluation of investment projects," Omega, Elsevier, vol. 3(6), pages 735-750, December.
    6. Christoffersen, Peter, 2011. "Elements of Financial Risk Management," Elsevier Monographs, Elsevier, edition 2, number 9780123744487.
    7. Estrada, Javier, 2007. "Mean-semivariance behavior: Downside risk and capital asset pricing," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 169-185.
    8. G. Hanoch & H. Levy, 1969. "The Efficiency Analysis of Choices Involving Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(3), pages 335-346.
    9. James P. Quirk & Rubin Saposnik, 1962. "Admissibility and Measurable Utility Functions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(2), pages 140-146.
    10. Bawa, Vijay S. & Lindenberg, Eric B., 1977. "Capital market equilibrium in a mean-lower partial moment framework," Journal of Financial Economics, Elsevier, vol. 5(2), pages 189-200, November.
    11. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jinjin Gu & Mo Li & Ping Guo & Guohe Huang, 2016. "Risk Assessment for Ecological Planning of Arid Inland River Basins Under Hydrological and Management Uncertainties," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(4), pages 1415-1431, March.
    2. Jinjin Gu & Mo Li & Ping Guo & Guohe Huang, 2016. "Risk Assessment for Ecological Planning of Arid Inland River Basins Under Hydrological and Management Uncertainties," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(4), pages 1415-1431, March.
    3. Imad Antoine Ibrahim, 2020. "Legal Implications of the Use of Big Data in the Transboundary Water Context," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 34(3), pages 1139-1153, February.
    4. Barbara Tchórzewska-Cieślak & Katarzyna Pietrucha-Urbanik & Emilia Kuliczkowska, 2020. "An Approach to Analysing Water Consumers’ Acceptance of Risk-Reduction Costs," Resources, MDPI, vol. 9(11), pages 1-16, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hildebrandt, Patrick & Knoke, Thomas, 2011. "Investment decisions under uncertainty--A methodological review on forest science studies," Forest Policy and Economics, Elsevier, vol. 13(1), pages 1-15, January.
    2. Post, Thierry & van Vliet, Pim, 2006. "Downside risk and asset pricing," Journal of Banking & Finance, Elsevier, vol. 30(3), pages 823-849, March.
    3. Wong, Wing-Keung, 2007. "Stochastic dominance and mean-variance measures of profit and loss for business planning and investment," European Journal of Operational Research, Elsevier, vol. 182(2), pages 829-843, October.
    4. Chan, Raymond H. & Chow, Sheung-Chi & Guo, Xu & Wong, Wing-Keung, 2022. "Central moments, stochastic dominance, moment rule, and diversification with an application," Chaos, Solitons & Fractals, Elsevier, vol. 161(C).
    5. Courtois, Olivier Le & Xu, Xia, 2023. "Semivariance below the maximum: Assessing the performance of economic and financial prospects," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 185-199.
    6. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Documentos de Trabajo del ICAE 2013-31, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
    7. David J. Pannell, 1991. "Pests and pesticides, risk and risk aversion," Agricultural Economics, International Association of Agricultural Economists, vol. 5(4), pages 361-383, August.
    8. Lean, Hooi Hooi & McAleer, Michael & Wong, Wing-Keung, 2015. "Preferences of risk-averse and risk-seeking investors for oil spot and futures before, during and after the Global Financial Crisis," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 204-216.
    9. Lizyayev, Andrey & Ruszczyński, Andrzej, 2012. "Tractable Almost Stochastic Dominance," European Journal of Operational Research, Elsevier, vol. 218(2), pages 448-455.
    10. Xu, Guo & Wing-Keung, Wong & Lixing, Zhu, 2013. "Almost Stochastic Dominance for Risk-Averse and Risk-Seeking Investors," MPRA Paper 51744, University Library of Munich, Germany.
    11. Fong, Wai Mun & Lean, Hooi Hooi & Wong, Wing Keung, 2008. "Stochastic dominance and behavior towards risk: The market for Internet stocks," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 194-208, October.
    12. Nowak, Maciej, 2004. "Preference and veto thresholds in multicriteria analysis based on stochastic dominance," European Journal of Operational Research, Elsevier, vol. 158(2), pages 339-350, October.
    13. Lean, Hooi Hooi & McAleer, Michael & Wong, Wing-Keung, 2010. "Market efficiency of oil spot and futures: A mean-variance and stochastic dominance approach," Energy Economics, Elsevier, vol. 32(5), pages 979-986, September.
    14. Schmid Friedrich & Trede Mark, 2000. "Stochastic Dominance in German Asset Returns: Empirical Evidence from the 1990s / Stochastische Dominanz von Renditen deutscher Aktien: Eine empirische Untersuchung für die 90er Jahre," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 220(3), pages 315-326, June.
    15. W. Wong & R. Chan, 2008. "Prospect and Markowitz stochastic dominance," Annals of Finance, Springer, vol. 4(1), pages 105-129, January.
    16. Ayub, Usman & Shah, Syed Zulfiqar Ali & Abbas, Qaisar, 2015. "Robust analysis for downside risk in portfolio management for a volatile stock market," Economic Modelling, Elsevier, vol. 44(C), pages 86-96.
    17. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2010. "Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach," CIRJE F-Series CIRJE-F-705, CIRJE, Faculty of Economics, University of Tokyo.
    18. M. Maheen & S. Resia Beegam, 2023. "Application of Nonparametric Stochastic Dominance Approach in the Performance Evaluation of Indian Mutual Funds," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 663-680, September.
    19. Lean, H.H. & McAleer, M.J. & Wong, W.-K., 2010. "Investor preferences for oil spot and futures based on mean-variance and stochastic dominance," Econometric Institute Research Papers EI 2010-37, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    20. Fong, Wai Mun & Wong, Wing Keung & Lean, Hooi Hooi, 2005. "International momentum strategies: a stochastic dominance approach," Journal of Financial Markets, Elsevier, vol. 8(1), pages 89-109, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:waterr:v:28:y:2014:i:12:p:3921-3935. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.