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Risk-averse decision-making for civil infrastructure exposed to low-probability, high-consequence events

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  • Cha, Eun Jeong
  • Ellingwood, Bruce R.

Abstract

Quantitative analysis and assessment of risk to civil infrastructure has two components: probability of a potentially damaging event and consequence of damage, measured in terms of financial or human losses. Decision models that have been utilized during the past three decades take into account the probabilistic component rationally, but address decision-maker attitudes toward consequences and risk only to a limited degree. The application of models reflecting these attitudes to decisions involving low-probability, high-consequence events that may impact civil infrastructure requires a fundamental understanding of risk acceptance attitudes and how they affect individual and group choices. In particular, the phenomenon of risk aversion may be a significant factor in decisions for civil infrastructure exposed to low-probability events with severe consequences, such as earthquakes, hurricanes or floods. This paper utilizes cumulative prospect theory to investigate the role and characteristics of risk-aversion in assurance of structural safety.

Suggested Citation

  • Cha, Eun Jeong & Ellingwood, Bruce R., 2012. "Risk-averse decision-making for civil infrastructure exposed to low-probability, high-consequence events," Reliability Engineering and System Safety, Elsevier, vol. 104(C), pages 27-35.
    • Handle: RePEc:eee:reensy:v:104:y:2012:i:c:p:27-35
    DOI: 10.1016/j.ress.2012.04.002
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    Cited by:

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    6. Li, Yaohan & Dong, You & Guo, Hongyuan, 2023. "Copula-based multivariate renewal model for life-cycle analysis of civil infrastructure considering multiple dependent deterioration processes," Reliability Engineering and System Safety, Elsevier, vol. 231(C).
    7. Yang, David Y. & Frangopol, Dan M., 2019. "Life-cycle management of deteriorating civil infrastructure considering resilience to lifetime hazards: A general approach based on renewal-reward processes," Reliability Engineering and System Safety, Elsevier, vol. 183(C), pages 197-212.
    8. Pedersen, Tom Ivar & Vatn, Jørn, 2022. "Optimizing a condition-based maintenance policy by taking the preferences of a risk-averse decision maker into account," Reliability Engineering and System Safety, Elsevier, vol. 228(C).
    9. Wilton, Edgar & Delarue, Erik & D’haeseleer, William & van Sark, Wilfried, 2014. "Reconsidering the capacity credit of wind power: Application of cumulative prospect theory," Renewable Energy, Elsevier, vol. 68(C), pages 752-760.
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    11. Grechuk, Bogdan & Zabarankin, Michael, 2014. "Risk averse decision making under catastrophic risk," European Journal of Operational Research, Elsevier, vol. 239(1), pages 166-176.
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    14. Suo, Weilan & Wang, Lin & Li, Jianping, 2021. "Probabilistic risk assessment for interdependent critical infrastructures: A scenario-driven dynamic stochastic model," Reliability Engineering and System Safety, Elsevier, vol. 214(C).

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