A comparison of simplified value function approaches for treating uncertainty in multi-criteria decision analysis
Uncertainty is present in many decisions where an action's consequences are unknown because they depend on future events. Multi-attribute utility theory (MAUT) offers an axiomatic basis for choice, but practitioners may prefer to use simpler decision models for transparency, ease of use, or other practical reasons. We identify some ‘simplified’ models currently in use and use a simulation experiment to evaluate their ability to approximate results obtained using MAUT. Our basic message is that avoiding assessment errors in the application of a simplified model is more important than the choice of a particular type of model, but that the best performance over a range of decision problems is from a model using a small number of quantiles.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 40 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Jyrki Wallenius & James S. Dyer & Peter C. Fishburn & Ralph E. Steuer & Stanley Zionts & Kalyanmoy Deb, 2008. "Multiple Criteria Decision Making, Multiattribute Utility Theory: Recent Accomplishments and What Lies Ahead," Management Science, INFORMS, vol. 54(7), pages 1336-1349, July.
- Garthwaite, Paul H. & Kadane, Joseph B. & O'Hagan, Anthony, 2005. "Statistical Methods for Eliciting Probability Distributions," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 680-701, June.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
- Rakes, Terry R. & Deane, Jason K. & Paul Rees, Loren, 2012. "IT security planning under uncertainty for high-impact events," Omega, Elsevier, vol. 40(1), pages 79-88, January.
- Ballestero, Enrique, 2001. "Stochastic goal programming: A mean-variance approach," European Journal of Operational Research, Elsevier, vol. 131(3), pages 476-481, June.
- Craig W. Kirkwood, 1992. "Estimating the Impact of Uncertainty on a Deterministic Multiattribute Evaluation," Management Science, INFORMS, vol. 38(6), pages 819-826, June.
- Sawik, Tadeusz, 2011. "Selection of supply portfolio under disruption risks," Omega, Elsevier, vol. 39(2), pages 194-208, April.
- Bose, Utpal & Davey, Anne M. & Olson, David L., 1997. "Multi-attribute utility methods in group decision making: Past applications and potential for inclusion in GDSS," Omega, Elsevier, vol. 25(6), pages 691-706, December.
- Durbach, Ian N. & Stewart, Theodor J., 2011. "An experimental study of the effect of uncertainty representation on decision making," European Journal of Operational Research, Elsevier, vol. 214(2), pages 380-392, October.
- F. Hutton Barron & Bruce E. Barrett, 1996. "Decision Quality Using Ranked Attribute Weights," Management Science, INFORMS, vol. 42(11), pages 1515-1523, November.
- Arcelus, F.J. & Kumar, Satyendra & Srinivasan, G., 2012. "Risk tolerance and a retailer's pricing and ordering policies within a newsvendor framework," Omega, Elsevier, vol. 40(2), pages 188-198, April.
- Hajkowicz, Stefan & Higgins, Andrew, 2008. "A comparison of multiple criteria analysis techniques for water resource management," European Journal of Operational Research, Elsevier, vol. 184(1), pages 255-265, January.
- Grigoroudis, E. & Orfanoudaki, E. & Zopounidis, C., 2012. "Strategic performance measurement in a healthcare organisation: A multiple criteria approach based on balanced scorecard," Omega, Elsevier, vol. 40(1), pages 104-119, January.
- Butler, John & Jia, Jianmin & Dyer, James, 1997. "Simulation techniques for the sensitivity analysis of multi-criteria decision models," European Journal of Operational Research, Elsevier, vol. 103(3), pages 531-546, December.
- Donald L. Keefer & Samuel E. Bodily, 1983. "Three-Point Approximations for Continuous Random Variables," Management Science, INFORMS, vol. 29(5), pages 595-609, May.
- Carl S. Spetzler & Carl-Axel S. Staël Von Holstein, 1975. "Exceptional Paper--Probability Encoding in Decision Analysis," Management Science, INFORMS, vol. 22(3), pages 340-358, November.
- Durbach, Ian N. & Stewart, Theodor J., 2009. "Using expected values to simplify decision making under uncertainty," Omega, Elsevier, vol. 37(2), pages 312-330, April.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:40:y:2012:i:4:p:456-464. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.