کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
479797 | 1446020 | 2014 | 11 صفحه PDF | دانلود رایگان |
• A new approach to modeling of the risk of catastrophic events is presented.
• In this approach, the safety-first principle agrees with axioms of rational behavior.
• A robust preference relation is introduced.
• The approach is demonstrated in evaluating nuclear power plant projects.
A nonstandard probabilistic setting for modeling of the risk of catastrophic events is presented. It allows random variables to take on infinitely large negative values with non-zero probability, which correspond to catastrophic consequences unmeasurable in monetary terms, e.g. loss of human lives. Thanks to this extension, the safety-first principle is proved to be consistent with traditional axioms on a preference relation, such as monotonicity, continuity, and risk aversion. Also, a robust preference relation is introduced, and an example of a monotone robust preference relation, sensitive to catastrophic events in the sense of Chichilnisky (2002), is provided. The suggested setting is demonstrated in evaluating nuclear power plant projects when the probability of a catastrophe is itself a random variable.
Journal: European Journal of Operational Research - Volume 239, Issue 1, 16 November 2014, Pages 166–176