IDEAS home Printed from https://ideas.repec.org/a/eee/reensy/v214y2021ics0951832021002441.html
   My bibliography  Save this article

A new method for managing multidimensional risks in Natural Gas Pipelines based on non-Expected Utility

Author

Listed:
  • Medeiros, Cristina Pereira
  • da Silva, Lucas Borges Leal
  • Alencar, Marcelo Hazin
  • de Almeida, Adiel Teixeira

Abstract

Enhancing safety and maintaining profitable operations in various types of organizations, including in gas transmission and distribution companies, is a challenging task. Multidimensional risk analysis of Natural Gas Pipelines (NGP) has been carried out in decision-making in order to guide the decision-maker (DM) in managing resource allocation and prioritizing risks in pipeline sections. Although the Literature puts a spotlight on Expected Utility (EU) methods for assessing DM's preferences, the NGP problem is based on the probability of the occurrence of hazard scenarios being small, and yet there being high impacts when a failure occurs. That is why this paper proposes a new multidimensional model for assessing NGP risks: the MRDU model. To the best of our knowledge, there is an absence in the literature of studies on using non-Expected Utility (non-EU) methods. Non-EU is a new approach which is based on Utility Theory. Deviations of utilities are explored and this incorporates contributions from the Rank-Dependent Utility (RDU)-based risk approach. Relevant results are compared and an extensive sensitivity analysis is conducted. Results show that the risk approach based on non-EU gives greater support to the recommendations made to the DM with regard to prioritizing NGP sections.

Suggested Citation

  • Medeiros, Cristina Pereira & da Silva, Lucas Borges Leal & Alencar, Marcelo Hazin & de Almeida, Adiel Teixeira, 2021. "A new method for managing multidimensional risks in Natural Gas Pipelines based on non-Expected Utility," Reliability Engineering and System Safety, Elsevier, vol. 214(C).
    • Handle: RePEc:eee:reensy:v:214:y:2021:i:c:s0951832021002441
    DOI: 10.1016/j.ress.2021.107709
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0951832021002441
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ress.2021.107709?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. Krawczyk, Michał Wiktor, 2015. "Probability weighting in different domains: The role of affect, fungibility, and stakes," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 1-15.
    2. Adam Booij & Bernard Praag & Gijs Kuilen, 2010. "A parametric analysis of prospect theory’s functionals for the general population," Theory and Decision, Springer, vol. 68(1), pages 115-148, February.
    3. Michael H. Birnbaum, 2005. "Three New Tests of Independence That Differentiate Models of Risky Decision Making," Management Science, INFORMS, vol. 51(9), pages 1346-1358, September.
    4. Adam Oliver, 2003. "Testing rank‐dependent utility theory for health outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 12(10), pages 863-871, October.
    5. Han Bleichrodt & Jose Luis Pinto, 2000. "A Parameter-Free Elicitation of the Probability Weighting Function in Medical Decision Analysis," Management Science, INFORMS, vol. 46(11), pages 1485-1496, November.
    6. Chen, Lihong & Ren, Jingzheng, 2018. "Multi-attribute sustainability evaluation of alternative aviation fuels based on fuzzy ANP and fuzzy grey relational analysis," Journal of Air Transport Management, Elsevier, vol. 68(C), pages 176-186.
    7. Burgherr, Peter & Eckle, Petrissa & Hirschberg, Stefan, 2012. "Comparative assessment of severe accident risks in the coal, oil and natural gas chains," Reliability Engineering and System Safety, Elsevier, vol. 105(C), pages 97-103.
    8. Shaw, W. Douglass & Woodward, Richard T., 2008. "Why environmental and resource economists should care about non-expected utility models," Resource and Energy Economics, Elsevier, vol. 30(1), pages 66-89, January.
    9. Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, vol. 42(8), pages 1131-1150, August.
    10. Gomes, Wellison J.S. & Beck, André T. & Haukaas, Terje, 2013. "Optimal inspection planning for onshore pipelines subject to external corrosion," Reliability Engineering and System Safety, Elsevier, vol. 118(C), pages 18-27.
    11. W. J. Wouter Botzen & Jeroen C.J.M. van den Bergh, 2009. "Bounded Rationality, Climate Risks, and Insurance: Is There a Market for Natural Disasters?," Land Economics, University of Wisconsin Press, vol. 85(2), pages 265-278.
    12. Joost M. E. Pennings & Ale Smidts, 2003. "The Shape of Utility Functions and Organizational Behavior," Management Science, INFORMS, vol. 49(9), pages 1251-1263, September.
    13. Adiel Teixeira de Almeida & Cristiano Alexandre Virgínio Cavalcante & Marcelo Hazin Alencar & Rodrigo José Pires Ferreira & Adiel Teixeira de Almeida-Filho & Thalles Vitelli Garcez, 2015. "Multicriteria and Multiobjective Models for Risk, Reliability and Maintenance Decision Analysis," International Series in Operations Research and Management Science, Springer, edition 127, number 978-3-319-17969-8, December.
    14. Dundulis, Gintautas & ŽutautaitÄ—, Inga & Janulionis, Remigijus & UÅ¡puras, Eugenijus & RimkeviÄ ius, Sigitas & Eid, Mohamed, 2016. "Integrated failure probability estimation based on structural integrity analysis and failure data: Natural gas pipeline case," Reliability Engineering and System Safety, Elsevier, vol. 156(C), pages 195-202.
    15. Mohammed Abdellaoui & Ahmed Driouchi & Olivier L’Haridon, 2011. "Risk aversion elicitation: reconciling tractability and bias minimization," Theory and Decision, Springer, vol. 71(1), pages 63-80, July.
    16. Michael H. Birnbaum & Jeffrey P. Bahra, 2007. "Gain-Loss Separability and Coalescing in Risky Decision Making," Management Science, INFORMS, vol. 53(6), pages 1016-1028, June.
    17. Papadopoulou, Maria P. & Antoniou, Constantinos, 2014. "Environmental impact assessment methodological framework for liquefied natural gas terminal and transport network planning," Energy Policy, Elsevier, vol. 68(C), pages 306-319.
    18. Tavana, Madjid & Behzadian, Majid & Pirdashti, Mohsen & Pirdashti, Hasan, 2013. "A PROMETHEE-GDSS for oil and gas pipeline planning in the Caspian Sea basin," Energy Economics, Elsevier, vol. 36(C), pages 716-728.
    19. Gijs van de Kuilen & Peter P. Wakker, 2011. "The Midweight Method to Measure Attitudes Toward Risk and Ambiguity," Management Science, INFORMS, vol. 57(3), pages 582-598, March.
    20. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    21. Yu, Xuchao & Liang, Wei & Zhang, Laibin & Reniers, Genserik & Lu, Linlin, 2018. "Risk assessment of the maintenance process for onshore oil and gas transmission pipelines under uncertainty," Reliability Engineering and System Safety, Elsevier, vol. 177(C), pages 50-67.
    22. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    23. Bertrand R. Munier, 2016. "On bespoke decision-aid under risk: the engineering behind preference elicitation," Post-Print halshs-02042799, HAL.
    24. Aven, Terje, 2016. "On the use of conservatism in risk assessments," Reliability Engineering and System Safety, Elsevier, vol. 146(C), pages 33-38.
    25. Kemel, Emmanuel & Paraschiv, Corina, 2013. "Prospect Theory for joint time and money consequences in risk and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 81-95.
    26. Golo-Friedrich Bauermeister & Daniel Hermann & Oliver Musshoff, 2018. "Consistency of determined risk attitudes and probability weightings across different elicitation methods," Theory and Decision, Springer, vol. 84(4), pages 627-644, June.
    27. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    28. Medeiros, C.P. & Alencar, M.H. & de Almeida, A.T., 2017. "Multidimensional risk evaluation of natural gas pipelines based on a multicriteria decision model using visualization tools and statistical tests for global sensitivity analysis," Reliability Engineering and System Safety, Elsevier, vol. 165(C), pages 268-276.
    29. Aven, Terje & Kristensen, Vidar, 2019. "How the distinction between general knowledge and specific knowledge can improve the foundation and practice of risk assessment and risk-informed decision-making," Reliability Engineering and System Safety, Elsevier, vol. 191(C).
    30. Kontek, Krzysztof & Birnbaum, Michael H., 2019. "The impact of middle outcomes on lottery valuations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 30-44.
    31. Zhang, Y. & Weng, W.G., 2020. "Bayesian network model for buried gas pipeline failure analysis caused by corrosion and external interference," Reliability Engineering and System Safety, Elsevier, vol. 203(C).
    32. Horst Zank, 2001. "Cumulative Prospect Theory for Parametric and Multiattribute Utilities," Mathematics of Operations Research, INFORMS, vol. 26(1), pages 67-81, February.
    33. Marek Urbanik & Barbara Tchórzewska-Cieślak & Katarzyna Pietrucha-Urbanik, 2019. "Analysis of the Safety of Functioning Gas Pipelines in Terms of the Occurrence of Failures," Energies, MDPI, vol. 12(17), pages 1-13, August.
    34. Brito, Anderson J. & de Almeida, Adiel Teixeira & Mota, Caroline M.M., 2010. "A multicriteria model for risk sorting of natural gas pipelines based on ELECTRE TRI integrating Utility Theory," European Journal of Operational Research, Elsevier, vol. 200(3), pages 812-821, February.
    35. Liu, Aihua & Chen, Ke & Huang, Xiaofei & Li, Didi & Zhang, Xiaochun, 2021. "Dynamic risk assessment model of buried gas pipelines based on system dynamics," Reliability Engineering and System Safety, Elsevier, vol. 208(C).
    36. Brito, A.J. & de Almeida, A.T., 2009. "Multi-attribute risk assessment for risk ranking of natural gas pipelines," Reliability Engineering and System Safety, Elsevier, vol. 94(2), pages 187-198.
    37. Mohammed Abdellaoui, 2000. "Parameter-Free Elicitation of Utility and Probability Weighting Functions," Management Science, INFORMS, vol. 46(11), pages 1497-1512, November.
    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. Casado, Ramon Swell Gomes Rodrigues & Alencar, Marcelo Hazin & de Almeida, Adiel Teixeira, 2022. "Combining a multidimensional risk evaluation with an implicit enumeration algorithm to tackle the portfolio selection problem of a natural gas pipeline," Reliability Engineering and System Safety, Elsevier, vol. 221(C).
    2. Yang, Kai & Hou, Lei & Man, Jianfeng & Yu, Qiaoyan & Li, Yu & Zhang, Xinru & Liu, Jiaquan, 2023. "Supply reliability analysis of natural gas pipeline network based on demand-side economic loss risk," Reliability Engineering and System Safety, Elsevier, vol. 230(C).
    3. Yin, Yuanbo & Yang, Hao & Duan, Pengfei & Li, Luling & Zio, Enrico & Liu, Cuiwei & Li, Yuxing, 2022. "Improved quantitative risk assessment of a natural gas pipeline considering high-consequence areas," Reliability Engineering and System Safety, Elsevier, vol. 225(C).
    4. Wang, WuChang & Zhang, Yi & Li, YuXing & Hu, Qihui & Liu, Chengsong & Liu, Cuiwei, 2022. "Vulnerability analysis method based on risk assessment for gas transmission capabilities of natural gas pipeline networks," Reliability Engineering and System Safety, Elsevier, vol. 218(PB).

    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. Kpegli, Yao Thibaut & Corgnet, Brice & Zylbersztejn, Adam, 2023. "All at once! A comprehensive and tractable semi-parametric method to elicit prospect theory components," Journal of Mathematical Economics, Elsevier, vol. 104(C).
    2. Yao Thibaut Kpegli, 2023. "Smoothing Spline Method for Measuring Prospect Theory Components," Working Papers 2303, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Jakusch, Sven Thorsten & Meyer, Steffen & Hackethal, Andreas, 2019. "Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)," SAFE Working Paper Series 146, Leibniz Institute for Financial Research SAFE, revised 2019.
    4. Salvatore Greco & Fabio Rindone, 2014. "The bipolar Choquet integral representation," Theory and Decision, Springer, vol. 77(1), pages 1-29, June.
    5. Gijs van de Kuilen & Peter P. Wakker, 2011. "The Midweight Method to Measure Attitudes Toward Risk and Ambiguity," Management Science, INFORMS, vol. 57(3), pages 582-598, March.
    6. Katarzyna M. Werner & Horst Zank, 2019. "A revealed reference point for prospect theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(4), pages 731-773, June.
    7. Ilke Aydogan & Yu Gao, 2020. "Experience and rationality under risk: re-examining the impact of sampling experience," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1100-1128, December.
    8. Stephen G Dimmock & Roy Kouwenberg & Olivia S Mitchell & Kim Peijnenburg, 2021. "Household Portfolio Underdiversification and Probability Weighting: Evidence from the Field," The Review of Financial Studies, Society for Financial Studies, vol. 34(9), pages 4524-4563.
    9. Arjan Verschoor & Ben D’Exelle, 2022. "Probability weighting for losses and for gains among smallholder farmers in Uganda," Theory and Decision, Springer, vol. 92(1), pages 223-258, February.
    10. Pavlo Blavatskyy, 2021. "A simple non-parametric method for eliciting prospect theory's value function and measuring loss aversion under risk and ambiguity," Theory and Decision, Springer, vol. 91(3), pages 403-416, October.
    11. Dorian Jullien & Alexandre Truc, 2024. "Towards a History of Behavioral and Experimental Economics in France," GREDEG Working Papers 2024-23, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    12. Attema, Arthur E. & Brouwer, Werner B.F. & l’Haridon, Olivier, 2013. "Prospect theory in the health domain: A quantitative assessment," Journal of Health Economics, Elsevier, vol. 32(6), pages 1057-1065.
    13. James Andreoni & Charles Sprenger, 2011. "Uncertainty Equivalents: Testing the Limits of the Independence Axiom," NBER Working Papers 17342, National Bureau of Economic Research, Inc.
    14. Ulrich Schmidt & Horst Zank, 2008. "Risk Aversion in Cumulative Prospect Theory," Management Science, INFORMS, vol. 54(1), pages 208-216, January.
    15. Han Bleichrodt & Ulrich Schmidt & Horst Zank, 2009. "Additive Utility in Prospect Theory," Management Science, INFORMS, vol. 55(5), pages 863-873, May.
    16. Géraldine Bocquého & Julien Jacob & Marielle Brunette, 2020. "Prospect theory in experiments : behaviour in loss domain and framing effects," Working Papers hal-02987294, HAL.
    17. Jinrui Pan & Craig S. Webb & Horst Zank, 2019. "Delayed probabilistic risk attitude: a parametric approach," Theory and Decision, Springer, vol. 87(2), pages 201-232, September.
    18. Laurent Denant-Boemont & Olivier L’Haridon, 2013. "La rationalité à l'épreuve de l'économie comportementale," Revue française d'économie, Presses de Sciences-Po, vol. 0(2), pages 35-89.
    19. Webb, Craig S. & Zank, Horst, 2011. "Accounting for optimism and pessimism in expected utility," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 706-717.
    20. Mich�le Cohen, 2015. "Risk Perception, Risk Attitude, and Decision: A Rank-Dependent Analysis," Mathematical Population Studies, Taylor & Francis Journals, vol. 22(1), pages 53-70, March.

    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:eee:reensy:v:214:y:2021:i:c:s0951832021002441. 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: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/reliability-engineering-and-system-safety .

    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.