Facets of Robust Decisions

Y. Ermoliev and L. Hordijk
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Y. Ermoliev: Institute for Applied Systems Analysis
L. Hordijk: Institute for Applied Systems Analysis

A chapter in Coping with Uncertainty, 2006, pp 3-28 from Springer

Abstract: Abstract The aim of this paper is to provide an overview of existing concepts of robustness and to identify promising directions for coping with uncertainty and risks surrounding on-going global changes. Unlike statistical robustness, general decision problems may have rather different facets of robustness. In particular, a key issue is the sensitivity of decisions with respect to low-probability catastrophic events. That is, robust decisions in the presence of catastrophic events are fundamentally different from decisions ignoring them. Specifically, proper treatment of extreme catastrophic events requires new sets of feasible decisions, adjusted to risk performance indicators, and new spatial, social and temporal dimensions. The discussion is deliberately kept at a level comprehensible to a broad audience through the use of simple examples that can be extended to rather general models. In fact, these examples often illustrate fragments of models that are being developed at IIASA.

Keywords: Robustness; decisions; uncertainty; stochastic optimization; discounting; downscaling; catastrophe modeling; extreme events; simulation (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-540-35262-4_1

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DOI: 10.1007/3-540-35262-7_1

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