Engineering Decisions Under Risk-Averseness
NAVAL POSTGRADUATE SCHOOL MONTEREY CA DEPT OF OPERATIONS RESEARCH
Pagination or Media Count:
Engineering decisions are invariably made under substantial uncertainty about current and future system cost and response, including cost and response associated with low-probability, highconsequence events. A risk-neutral decision maker would rely on expected values when comparing designs, while a risk-averse decision maker might adopt nonlinear utility functions or failure probability criteria. The paper shows that these models for making decisions fall within a framework of risk measures that includes many other possibilities. General recommendations for selecting risk measures lead to decision models for risk-averse decision making that comprehensively represent risks in engineering systems, avoid paradoxes, and accrue substantial benefits in subsequent risk, reliability, and cost optimization.
- Administration and Management
- Operations Research
- Civil Engineering