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Risk Attitude in Multicriteria Decision Analysis: A Compromise Approach

Author

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  • Juan Ribes

    (ETSI Informáticos, Campus de Montegancedo, Universidad Politécnica de Madrid, Boadilla del Monte, 28660 Madrid, Spain
    Department of Financial and Actuarial Economics and Statistics, Facultad de Ciencias Económicas y Empresariales, Campus de Somosaguas, Universidad Complutense de Madrid, Pozuelo de Alarcón, 28223 Madrid, Spain
    These authors contributed equally to this work.)

  • Jacinto González-Pachón

    (Department of Artificial Intelligence, Campus de Montegancedo, Universidad Politécnica de Madrid, Boadilla del Monte, 28660 Madrid, Spain
    These authors contributed equally to this work.)

Abstract

In fields on which decisions need to be taken including health, as we are seeing nowadays in the COVID-19 crisis, decision-makers face multiple criteria and results with a random component. In stochastic multicriteria decision-making models, the risk attitude of the decision maker is a relevant factor. Traditionally, the shape of a utility function is the only element that represents the decision maker’s risk attitude. The eduction process of multi-attribute utility functions implies some operational drawbacks, and it is not always easy. In this paper, we propose a new element with which the decision maker’s risk attitude can be implemented: the selection of the stochastic efficiency concept to be used during a decision analysis. We suggest representing the risk attitude as a conflict between two poles: risk neutral attitude, associated with best expectations, and risk aversion attitude, associated with a lower uncertainty. The Extended Goal Programming formulation has inspired the parameter that is introduced in a new risk attitude formulation. This parameter reflects the trade-off between the two classical poles with respect to risk attitude . Thus, we have produced a new stochastic efficiency concept that we call Compromise Efficiency .

Suggested Citation

  • Juan Ribes & Jacinto González-Pachón, 2021. "Risk Attitude in Multicriteria Decision Analysis: A Compromise Approach," IJERPH, MDPI, vol. 18(12), pages 1-14, June.
    • Handle: RePEc:gam:jijerp:v:18:y:2021:i:12:p:6536-:d:576756
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    References listed on IDEAS

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