Download presentation

Presentation is loading. Please wait.

Published byAllyson Burnsworth Modified about 1 year ago

1
PLANNING UNDER UNCERTAINTY REGRET THEORY

2
MINIMAX REGRET ANALYSIS Motivating Example Traditional way Maximize Average … select A Optimistic decision maker MaxiMax … select C Pessimistic decision maker MaxiMin … select D

3
MINIMAX REGRET ANALYSIS If chosen decision is the best Zero regret Nothing is better than the best No negetive Regret

4
MINIMAX REGRET ANALYSIS Motivating Example Calculate regret: find maximum regret A …regret = 8 @ low market C …regret = 9 @ low market D …regret = 10 @ high market B …regret = 7 @ medium market MINIMAX B In general, gives conservative decision but not pessimistic.

5
MINIMAX REGRET ANALYSIS Two-Stage Stochastic Programming Using Regret Theory Here & Now (HN) Uncertainty Free Optimal Profit Two-Stage Model Optimal Profit Wait & See (WS)

6
MINIMAX REGRET ANALYSIS Two-Stage Stochastic Programming Using Regret Theory where: subject to:,,

7
MINIMAX REGRET ANALYSIS Two-Stage Stochastic Programming Using Regret Theory where: subject to:,,

8
MINIMAX REGRET ANALYSIS Two-Stage Stochastic Programming Using Regret Theory where: subject to:,,

9
MINIMAX REGRET ANALYSIS Two-Stage Stochastic Programming Using Regret Theory

10
MINIMAX REGRET ANALYSIS Limitations on Regret Theory May select different preferences if one of the alternatives was excluded or a new alternative is added. $1000 - $1050 = 50 $100 - $150 = 50 s1s1 s2s2 s3s3 Max. Regret A10005 B99954099 C0100200 D150850150 It is not necessary that equal differences in profit would always correspond to equal amounts of regret: A small advantage in one scenario may lead to the loss of larger advantages in other scenarios.

11
CONCLUSION Minimizing the average regret instead of minimizing the maximum. Measure relative regret instead of absolute regret: 1050-1000 = 50150-100 = 50 versus instead of: s1s1 s2s2 s3s3 Max. Regret A10005 B99954099 C0100200 D150850150 Suggested improvements to minimax-regret criterion: Upper Regret 52.5 97 150 117.5 Avrg. Regret 35 78 100 78.3 Minimizing the upper regret average instead of the maximum only.

Similar presentations

© 2017 SlidePlayer.com Inc.

All rights reserved.

Ads by Google