Incorporating the status quo effect into the decision making process: The case of municipal companies merger

Decision-making for cooperation between municipal entities involves elected members serving public interest who argue in both quantitative (e.g. financial performance), and qualitative (e.g. social acceptance) grounds. Policy support should consider conflicting objectives in a context of uncertainty and imprecision as well as in presence of organizational lock-ins that tend to favor incumbent arrangements. In search of appropriate algorithm to support decision making in such cases we opted for the PROMETHEE outranking method integrating novel findings of behavioral theory. Thus its preference functions are specified so that they reflect bounded rationality that shapes risk attitudes of decision makers within the uncertain environment of public management. Moreover alternative weighting procedures have been applied for group decisions. The prospect theory multi-criteria methodology, termed PT-PROMETHEE is implemented relating proposed options to observed behavior providing useful insights especially regarding status quo options also allowing for sensitivity analysis. Thus acceptance of MCDM support by the stakeholders is enhanced leading to solid compromise institutional arrangements.