Thursday 21st April
5.30pm for 6.00pm
Blackett Room, 886, Department of Management Science
University of Strathclyde, Graham Hills Building, 40 George Street, Glasgow
Title:
Multi-attribute utility theory and FN-criteria for measuring societal risk
Presented by:
Prof Tim Bedford, Department of Management Science
Abstract:
The paper deals with the justification of criteria for group risk using
methods from utility theory. Group, or societal, risk is most often
represented by FN curves, and regulation applied through the use of
criterion lines. However, in order to compare different risk alternatives
it is necessary to summarize the FN curve in a single number. A number of
authors have used the concept of a “disutilty criterion” using an expected
value measure, which is claimed to be risk averse. We show how a multi-
attribute approach can be used to reveal the implicit assumptions behind
the formula. A discussion is given of the properties of the disutility
function, in particular the fact that it is insensitive to epistemic
uncertainty. A new approach is outlined that appears to have a number of
attractive properties - in particular it enables us to make risk attitude
dependent on the total accidents, and takes account of the difference
between epistemic uncertainty about the FN curve and a “best estimate”
approach. Although no closed formula is available, the method can be
implemented in a spreadsheet.
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