Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
482608 | European Journal of Operational Research | 2006 | 14 Pages |
Abstract
This paper builds a probabilistic model to analyze the risk-reward tradeoffs that larger telecommunications network elements present. Larger machines offer rewards in the form of cost savings due to economies of scale. But large machines are riskier because they affect more customers when they fail. Our model translates the risk of outages into dollar costs, which are random variables. This step enables us to combine the deployment cost and outage cost into a total cost. Once we express the decision makers' preferences via a utility function, we can find the machine size that minimizes the total cost's expected utility, thereby achieving an optimal tradeoff between reward and risk. The expected utility answers the question “how big is too big?”.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Donald E. Smith,