2751. Scenario-based decision analysis when scenarios are not mutually exclusive: axiomatic foundations and implications to decision support
Invited abstract in session MB-33: Scenarios and Stochastic Dominance, stream Decision Analysis.
Monday, 10:30-12:00Room: Maurice Keyworth 1.31
Authors (first author is the speaker)
| 1. | Juuso Liesiö
|
| Department of Information and Service Management, Aalto University School of Business | |
| 2. | Eeva Vilkkumaa
|
| Department of Information and Service Management, Aalto University, School of Business |
Abstract
Scenario-based decision analysis (SDA) relies on (i) characterizing possible futures with a set of scenarios, (ii) evaluating how decision alternatives perform in each scenario, and (iii) harnessing expected (multi-attribute) utility to generate decision recommendations on which alternative to select. Although SDA has been successfully applied in real-world decision support, it is commonly criticized for (implicitly) assuming that the scenarios are mutually exclusive. This paper establishes an axiomatic foundation for SDA using subjective expected utility theory and shows how relaxing the assumption of mutually exclusive scenarios results in a set of feasible probability measures for the possible futures, which can be reduced by eliciting (incomplete) probability statements from the decision makers. We develop dominance and ranking concepts to analyze how sensitive the decision recommendations are to violations of the mutually exclusivity assumptions as well as optimization models that enable the use of these concepts in practical applications. Finally, we demonstrate the approach by applying the developed models to real-world data.
Keywords
- Decision Analysis
- Decision Theory
- Decision Support Systems
Status: accepted
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