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Robust Portfolio Decision Analysis for Decision Making under Deep Uncertainty
Erin Baker, Professor The Armstrong Professional Development Professor and Industrial Engineering and Operations Research, University of Massachusetts, Amherst
Robust Portfolio Decision Analysis is an approach to support decision making when there is significant disagreement among scientists or other experts or models. We introduce the idea of Belief Dominance as a prescriptive operationalization of a concept that has appeared in the literature under a number of names. We use this dominance concept to eliminate bad alternatives. We then identify actions which are good regardless of the individual expert judgment. This approach encompasses many other robustness approaches in the literature, such as robust optimization. We present a proof-of-concept, applying the approach to the problem of choosing publically-funded energy technology R&D portfolios.
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Keywords: analysis and modeling anamod, risk and uncertainty riskunc, probability assessment probass, belief dominance