On a decision rule supported by a forecasting stage based on the decision maker’s coefficient of optimism

Abstract

The paper contains a description of a new approach (called the SF + AS method, i.e. the scenario forecasting + alternative selection method) that can be used in decision making under uncertainty when pure optimal strategies are sought-after. This procedure takes into consideration the level of decision maker's coefficient of optimism (or coefficient of pessimism) and consists of two stages: the true scenario forecasting (on the basis of the decision maker's preferences) and the appropriate alternative selection by taking into account the payoffs of the appointed true scenario or the most probable scenarios. In contradiction to existing decision rules, this procedure assumes that the decision making process should involve only a part of the payoff matrix because only one state of nature will occur in the end. The second essential difference between the SF + AS method and other decision rules is that in the first one there is an attempt to appoint globally the best and the worst scenario (regardless the alternative considered). Meanwhile, other procedures determine the status of a given event depending on the decision.

Project Net Present Value estimation under uncertainty

“…There are numerous decision rules devoted to decision making under uncertainty (see, for example, Basili 2006;Basili et al 2008;Basili and Chateauneuf 2011;Beauchene 2015;Chassein and Goerigk 2016;Ellsberg 2001;Etner et al 2012;Gaspars-Wieloch 2012, 2013, 2014a, b, c, d, 2015a, b, c, d, e, 2016a, b, 2017aGhirardato et al 2004;Gilboa 2009;Gilboa and Schmeidler 1989;Halpern and Leung 2014;Hayashi 2008;Hurwicz 1952;Ioan and Ioan 2011;Marinacci 2002;Nakamura1996;Perez et al 2015;Piasecki 1990;Savage 1961;Schmeidler 1986;Tversky and Kahneman 1992;Wald 1950), but some of them are based on the probability calculus or do notconsider the DM's nature-thus, they cannot be applied to the aforementioned problem.…”

Innovative Projects Scheduling with Scenario-Based Decision Project Graphs

“…It is worth mentioning that the term "uncertainty" and "risk" are interpreted in different ways in the literature depending on which theory is recognized: theory of decision or theory of economics (Birge, Louveaux 2011;Dubois, Prade 2012;Gaspars-Wieloch 2015c, 2016a, 2016b, 2017Guney, Newell 2015;Kaplan, Barish 1967;Kmietowicz, Pearman 1984;Knight 1921;Magruk 2016;Merigo 2015;Trzaskalik 2008;von Neumann, Morgenstern 1944;Voronova 2008;Ward, Chapman 2003). Here, we assume that uncertainty involves all situations with non-deterministic parameters (known or unknown probability distribution, lack of information about possible events), while risk is related to the possibility that some bad (or other than predicted) circumstances will happen.…”

On two applications of the Omega ratio: max?min and Omega(H+B) / O dwóch zastosowaniach wskaźnika Omega: max?min i Omega(H+B)

“…The literature offers numerous decision rules for DMPI [Guo 2013;Kmietowicz, Pearman 1984;Kofler, Zweifel 1993;Michalska, Pośpiech 2010;, Michalska 2012Weber 1987] and for DMCU [Gaspars 2007;GasparsWieloch 2013;2014a;2014b;2014c;2014d;2014e;2015a;2015b;2015c;2015d;2015e;2016;Hayashi 2008;Hurwicz 1952;Ioan, Ioan 2011;Piasecki 1990;Savage 1961;Wald 1950], but here we only investigate the use of the Ω ratio in these two decision cases.…”