Advantages of fuzzy approach compared to probabilistic approach in project evaluation

Simona Hašková (), Petr Šuleř () and Tomáš Krulický ()
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Simona Hašková: Institute of Technology and Business in České Budějovice, Czech Republic
Petr Šuleř: Institute of Technology and Business in České Budějovice, Czech Republic
Tomáš Krulický: Institute of Technology and Business in České Budějovice, Czech Republic

Entrepreneurship and Sustainability Issues, 2022, vol. 10, issue 1, 483-493

Abstract: Uncertainty is often encountered in relation to randomness or fuzziness. In the case of randomness, it can be described by means of a probability distribution; in the case of fuzziness, the fuzzy theory is applied. In the theoretical part, the authors deal with basic tools for describing both types of uncertainty. Probability and fuzzy method are interpreted in the context of their analogies and principal differences. Both techniques are applied in order to quantify the present expected value of a specific development project. The probabilistic solution leads to the point value E[PV], the fuzzy solution establishes the triangular fuzzy number with the subjective E[PV] not burdened with possible exaggerated expectations. The fuzzy approach proved to extend the probabilistic outcome by other additional information useful for decision-makers with different risk propensity.

Keywords: uncertainty; expected value; fuzzy number; risk propensity; evaluation (search for similar items in EconPapers)
JEL-codes: C02 C11 C45 C46 C63 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ssi:jouesi:v:10:y:2022:i:1:p:483-493

DOI: 10.9770/jesi.2022.10.1(27)

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