IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v14y2021i22p7694-d681149.html
   My bibliography  Save this article

The Use of Prospect Theory for Energy Sustainable Industry 4.0

Author

Listed:
  • Aldona Kluczek

    (Faculty of Mechanical and Industrial Engineering, Institute of Production Systems Organization, Warsaw University of Technology, 86 Narbutta Street, 02-524 Warsaw, Poland)

  • Patrycja Żegleń

    (Institute of Economics and Finance, Social Sciences College, University of Rzeszów, 1 Ćwiklińskiej Street, 35-601 Rzeszów, Poland)

  • Daniela Matušíková

    (Department of Tourism and Hotel Management, Faculty of Management, University of Prešov, 16 Konštantínova, 08001 Prešov, Slovakia)

Abstract

Industry 4.0 challenges facilities entrepreneurs to be competitive in the market in terms of energy by rational decision making. The goal of the paper is aimed at introducing Prospect Theory (PT) in Industry 4.0 for making decisions in order to select an optimal energy technology. To reach this goal, an approach for decision making on energy investment has been developed. In this paper, the authors have also provided a new opportunity to apply the new decision making method for strengthening Industry 4.0 by addressing energy concerns based on which rational decisions have been made. The study uses a fuzzy analytical hierarchy process for weighting the evaluation sub-criteria of energy technologies and a modified PT for making decisions related to the selection of one of the investigated technologies. The results show that it is possible to implement PT in Industry 4.0 via a decision making model for energy sustainability. Decision probability was achieved using a behavioral approach akin to Cumulative Prospect Theory (CPT) for the considered technology options. More specifically, the probability has created the same threshold-based decision possibilities. The authors used the case study method based on a company located in North America which produces hardwood lumber. The company uses a heating system containing natural gas-fired boilers. This study has also contributed to the literature on energy sustainable Industry 4.0 by demonstrating a new phenomenon/paradigm for energy sustainability-based Industry 4.0 through using PT. In this context, the main motivation of writing the article has been to promote energy sustainability via complex mechanisms and systems that involve interrelated functions.

Suggested Citation

  • Aldona Kluczek & Patrycja Żegleń & Daniela Matušíková, 2021. "The Use of Prospect Theory for Energy Sustainable Industry 4.0," Energies, MDPI, vol. 14(22), pages 1-29, November.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:22:p:7694-:d:681149
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/14/22/7694/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/14/22/7694/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bloch, Harry & Rafiq, Shuddhasattwa & Salim, Ruhul, 2015. "Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution," Economic Modelling, Elsevier, vol. 44(C), pages 104-115.
    2. Gao, Kun & Sun, Lijun & Yang, Ying & Meng, Fanyu & Qu, Xiaobo, 2021. "Cumulative prospect theory coupled with multi-attribute decision making for modeling travel behavior," Transportation Research Part A: Policy and Practice, Elsevier, vol. 148(C), pages 1-21.
    3. Einhorn, Hj & Hogarth, Rm, 1981. "Behavioral Decision-Theory - Processes Of Judgment And Choice," Journal of Accounting Research, Wiley Blackwell, vol. 19(1), pages 1-31.
    4. Ivan Moscati, 2016. "Retrospectives: How Economists Came to Accept Expected Utility Theory: The Case of Samuelson and Savage," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 219-236, Spring.
    5. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    6. Keith M. Marzilli Ericson & Andreas Fuster, 2014. "The Endowment Effect," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 555-579, August.
    7. Lisa Branchini & Maria Chiara Bignozzi & Benedetta Ferrari & Barbara Mazzanti & Saverio Ottaviano & Marcello Salvio & Claudia Toro & Fabrizio Martini & Andrea Canetti, 2021. "Cogeneration Supporting the Energy Transition in the Italian Ceramic Tile Industry," Sustainability, MDPI, vol. 13(7), pages 1-17, April.
    8. Klein, Martin & Deissenroth, Marc, 2017. "When do households invest in solar photovoltaics? An application of prospect theory," Energy Policy, Elsevier, vol. 109(C), pages 270-278.
    9. Fernando E. García-Muiña & María Sonia Medina-Salgado & Anna Maria Ferrari & Marco Cucchi, 2020. "Sustainability Transition in Industry 4.0 and Smart Manufacturing with the Triple-Layered Business Model Canvas," Sustainability, MDPI, vol. 12(6), pages 1-19, March.
    10. Julian Marius Müller & Daniel Kiel & Kai-Ingo Voigt, 2018. "What Drives the Implementation of Industry 4.0? The Role of Opportunities and Challenges in the Context of Sustainability," Sustainability, MDPI, vol. 10(1), pages 1-24, January.
    11. Robert Ulewicz & Dominika Siwiec & Andrzej Pacana & Magdalena Tutak & Jarosław Brodny, 2021. "Multi-Criteria Method for the Selection of Renewable Energy Sources in the Polish Industrial Sector," Energies, MDPI, vol. 14(9), pages 1-30, April.
    12. Rodrigo A. Estévez & Valeria Espinoza & Roberto D. Ponce Oliva & Felipe Vásquez-Lavín & Stefan Gelcich, 2021. "Multi-Criteria Decision Analysis for Renewable Energies: Research Trends, Gaps and the Challenge of Improving Participation," Sustainability, MDPI, vol. 13(6), pages 1-13, March.
    13. 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..
    14. Croson, Rachel & Gächter, Simon, 2010. "The science of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 122-131, January.
    15. Magdalena Krysiak & Aldona Kluczek, 2021. "A Multifaceted Challenge to Enhance Multicriteria Decision Support for Energy Policy," Energies, MDPI, vol. 14(14), pages 1-20, July.
    16. Dalenogare, Lucas Santos & Benitez, Guilherme Brittes & Ayala, Néstor Fabián & Frank, Alejandro Germán, 2018. "The expected contribution of Industry 4.0 technologies for industrial performance," International Journal of Production Economics, Elsevier, vol. 204(C), pages 383-394.
    17. Tan, Ruipeng & Lin, Boqiang & Liu, Xiying, 2019. "Impacts of eliminating the factor distortions on energy efficiency—A focus on China's secondary industry," Energy, Elsevier, vol. 183(C), pages 693-701.
    18. Steven Kane Curtis & Matthias Lehner, 2019. "Defining the Sharing Economy for Sustainability," Sustainability, MDPI, vol. 11(3), pages 1-25, January.
    19. Signe Waechter & Bernadette Sütterlin & Michael Siegrist, 2017. "Decision-Making Strategies for the Choice of Energy-friendly Products," Journal of Consumer Policy, Springer, vol. 40(1), pages 81-103, March.
    20. Ramchandra Bhandari & Benjamin Eduardo Arce & Vittorio Sessa & Rabani Adamou, 2021. "Sustainability Assessment of Electricity Generation in Niger Using a Weighted Multi-Criteria Decision Approach," Sustainability, MDPI, vol. 13(1), pages 1-25, January.
    21. Heutel, Garth, 2019. "Prospect theory and energy efficiency," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 236-254.
    22. Damian Hasterok & Rui Castro & Marcin Landrat & Krzysztof Pikoń & Markus Doepfert & Hugo Morais, 2021. "Polish Energy Transition 2040: Energy Mix Optimization Using Grey Wolf Optimizer," Energies, MDPI, vol. 14(2), pages 1-27, January.
    23. Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009. "Energy Efficiency Economics and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 597-620, September.
    24. Yanbin Li & Shuangshuang Shao & Feng Zhang, 2018. "An Analysis of the Multi-Criteria Decision-Making Problem for Distributed Energy Systems," Energies, MDPI, vol. 11(9), pages 1-12, September.
    25. De Giovanni, Pietro & Cariola, Alfio, 2021. "Process innovation through industry 4.0 technologies, lean practices and green supply chains," Research in Transportation Economics, Elsevier, vol. 90(C).
    26. Cai, Wei & Lai, Kee-hung, 2021. "Sustainability assessment of mechanical manufacturing systems in the industrial sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    27. Rafael Sánchez-Durán & Joaquín Luque & Julio Barbancho, 2019. "Long-Term Demand Forecasting in a Scenario of Energy Transition," Energies, MDPI, vol. 12(16), pages 1-23, August.
    28. Virginia Pilloni, 2018. "How Data Will Transform Industrial Processes: Crowdsensing, Crowdsourcing and Big Data as Pillars of Industry 4.0," Future Internet, MDPI, vol. 10(3), pages 1-14, March.
    29. Radosław Wolniak & Sebastian Saniuk & Sandra Grabowska & Bożena Gajdzik, 2020. "Identification of Energy Efficiency Trends in the Context of the Development of Industry 4.0 Using the Polish Steel Sector as an Example," Energies, MDPI, vol. 13(11), pages 1-16, June.
    30. Mostafa Shaaban & Jürgen Scheffran & Jürgen Böhner & Mohamed S. Elsobki, 2018. "Sustainability Assessment of Electricity Generation Technologies in Egypt Using Multi-Criteria Decision Analysis," Energies, MDPI, vol. 11(5), pages 1-25, May.
    31. Adedoyin, Festus Fatai & Bekun, Festus Victor & Driha, Oana M. & Balsalobre-Lorente, Daniel, 2020. "The effects of air transportation, energy, ICT and FDI on economic growth in the industry 4.0 era: Evidence from the United States," Technological Forecasting and Social Change, Elsevier, vol. 160(C).
    32. Patchara Phochanikorn & Chunqiao Tan, 2019. "An Integrated Multi-Criteria Decision-Making Model Based on Prospect Theory for Green Supplier Selection under Uncertain Environment: A Case Study of the Thailand Palm Oil Products Industry," Sustainability, MDPI, vol. 11(7), pages 1-22, March.
    33. Kai Ruggeri & Sonia Alí & Mari Louise Berge & Giulia Bertoldo & Ludvig D. Bjørndal & Anna Cortijos-Bernabeu & Clair Davison & Emir Demić & Celia Esteban-Serna & Maja Friedemann & Shannon P. Gibson & H, 2020. "Replicating patterns of prospect theory for decision under risk," Nature Human Behaviour, Nature, vol. 4(6), pages 622-633, June.
    34. Giancarlo Nota & Francesco David Nota & Domenico Peluso & Alonso Toro Lazo, 2020. "Energy Efficiency in Industry 4.0: The Case of Batch Production Processes," Sustainability, MDPI, vol. 12(16), pages 1-28, August.
    35. Chunguang Bai & Joseph Sarkis, 2020. "A supply chain transparency and sustainability technology appraisal model for blockchain technology," International Journal of Production Research, Taylor & Francis Journals, vol. 58(7), pages 2142-2162, April.
    36. Bożena Gajdzik & Sandra Grabowska & Sebastian Saniuk & Tadeusz Wieczorek, 2020. "Sustainable Development and Industry 4.0: A Bibliometric Analysis Identifying Key Scientific Problems of the Sustainable Industry 4.0," Energies, MDPI, vol. 13(16), pages 1-27, August.
    37. Alexander Melnik & Kirill Ermolaev, 2020. "Strategy Context of Decision Making for Improved Energy Efficiency in Industrial Energy Systems," Energies, MDPI, vol. 13(7), pages 1-28, March.
    38. Nicholas C. Barberis, 2013. "Thirty Years of Prospect Theory in Economics: A Review and Assessment," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 173-196, Winter.
    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. Stephany Isabel Vallarta-Serrano & Edgar Santoyo-Castelazo & Edgar Santoyo & Esther O. García-Mandujano & Holkan Vázquez-Sánchez, 2023. "Integrated Sustainability Assessment Framework of Industry 4.0 from an Energy Systems Thinking Perspective: Bibliometric Analysis and Systematic Literature Review," Energies, MDPI, vol. 16(14), pages 1-30, July.
    2. Xintong Wu & Zhendong Li & Fangcheng Tang, 2022. "The Effect of Carbon Price Volatility on Firm Green Transitions: Evidence from Chinese Manufacturing Listed Firms," Energies, MDPI, vol. 15(20), pages 1-11, October.
    3. Melike E. Bildirici & Sema Yılmaz Genç & Salih Boztuna, 2023. "Sustainability, Natural Gas Consumption, and Environmental Pollution in the Period of Industry 4.0 in Turkey: MS-Granger Causality and Fourier Granger Causality Analysis," Sustainability, MDPI, vol. 15(13), pages 1-14, July.

    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. Alex Imas & Sally Sadoff & Anya Samek, 2017. "Do People Anticipate Loss Aversion?," Management Science, INFORMS, vol. 63(5), pages 1271-1284, May.
    2. Häckel, Björn & Pfosser, Stefan & Tränkler, Timm, 2017. "Explaining the energy efficiency gap - Expected Utility Theory versus Cumulative Prospect Theory," Energy Policy, Elsevier, vol. 111(C), pages 414-426.
    3. Heutel, Garth, 2019. "Prospect theory and energy efficiency," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 236-254.
    4. Bai, Chunguang & Dallasega, Patrick & Orzes, Guido & Sarkis, Joseph, 2020. "Industry 4.0 technologies assessment: A sustainability perspective," International Journal of Production Economics, Elsevier, vol. 229(C).
    5. Gerda Ana Melnik-Leroy & Gintautas Dzemyda, 2021. "How to Influence the Results of MCDM?—Evidence of the Impact of Cognitive Biases," Mathematics, MDPI, vol. 9(2), pages 1-25, January.
    6. Tao, Zhenmin & Moncada, Jorge Andres & Delarue, Erik, 2023. "Exploring the impact of boundedly rational power plant investment decision-making by applying prospect theory," Utilities Policy, Elsevier, vol. 82(C).
    7. Eduard Marinov, 2017. "The 2017 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 117-159.
    8. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    9. Charles-Cadogan, G., 2018. "Losses loom larger than gains and reference dependent preferences in Bernoulli’s utility function," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 220-237.
    10. Gianluca Gionfriddo & Francesco Rizzi & Tiberio Daddi & Fabio Iraldo, 2023. "The impact of green marketing on collective behaviour: Experimental evidence from the sports industry," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 5349-5367, December.
    11. Simone Ferrari-Toniolo & Leo Chi U. Seak & Wolfram Schultz, 2022. "Risky choice: Probability weighting explains independence axiom violations in monkeys," Journal of Risk and Uncertainty, Springer, vol. 65(3), pages 319-351, December.
    12. Chen, Rongxin & Lepori, Gabriele M. & Tai, Chung-Ching & Sung, Ming-Chien, 2022. "Explaining cryptocurrency returns: A prospect theory perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    13. Itzhak Gilboa & Andrew Postlewaite & Larry Samuelson & David Schmeidler, 2019. "What are axiomatizations good for?," Theory and Decision, Springer, vol. 86(3), pages 339-359, May.
    14. Carolin Bock & Maximilian Schmidt, 2015. "Should I stay, or should I go? – How fund dynamics influence venture capital exit decisions," Review of Financial Economics, John Wiley & Sons, vol. 27(1), pages 68-82, November.
    15. Evgeny Kagan & Alexander Rybalov, 2022. "Subjective Trusts and Prospects: Some Practical Remarks on Decision Making with Imperfect Information," SN Operations Research Forum, Springer, vol. 3(1), pages 1-24, March.
    16. Klein, Martin & Deissenroth, Marc, 2017. "When do households invest in solar photovoltaics? An application of prospect theory," Energy Policy, Elsevier, vol. 109(C), pages 270-278.
    17. Dominika Czyz & Karolina Safarzynska, 2023. "Catastrophic Damages and the Optimal Carbon Tax Under Loss Aversion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(2), pages 303-340, June.
    18. Jakusch, Sven Thorsten, 2017. "On the applicability of maximum likelihood methods: From experimental to financial data," SAFE Working Paper Series 148, Leibniz Institute for Financial Research SAFE, revised 2017.
    19. Carpentier, A. & Reboud, X., 2018. "Why farmers consider pesticides the ultimate in crop protection: economic and behavioral insights," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277528, International Association of Agricultural Economists.
    20. Bryce McLaughlin & Jann Spiess, 2022. "Algorithmic Assistance with Recommendation-Dependent Preferences," Papers 2208.07626, arXiv.org, revised Jan 2024.

    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:gam:jeners:v:14:y:2021:i:22:p:7694-:d:681149. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.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.