Journal
INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH
Volume 19, Issue 1-2, Pages 253-281Publisher
WILEY
DOI: 10.1111/j.1475-3995.2010.00790.x
Keywords
Black Swans; New Nostradamuses; severe uncertainty; decision making; Voodoo decision theories; robust optimization; maximin; radius of stability
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The recent global financial crisis, natural disasters, and ongoing debate on global warming and climate change are a stark reminder of the huge challenges that severe uncertainty presents in decision and policy making. My objective in this paper is to look at some of the issues that need to be taken into account in the modeling and analysis of decision problems that are subject to severe uncertainty, paying special attention to some of the misconceptions that are being promulgated in this area. I also examine two diametrically opposed approaches to uncertainty. One, that emphasizes that the difficulties encountered in the modeling, analysis, and solution of decision problems in the face of severe uncertainty are in fact insurmountable, and another that claims to provide, against all odds, a reliable strategy for a successful handling of situations subject to severe uncertainty.
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