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Objectives
• ECONOMIC POLICY • maximize production
• equalize distribution
• GOVERNMENT POLICY• reconcile many interest groups
• BUSINESS• reconcile short run/long run tradeoffs
• utlize long range planning (maintenance, labor)
BUSINESS OBJECTIVES
• PROFIT• short run cash flow, after tax profit, long run
• RISK• diversify, hedge
• MARKET DEVELOPMENT• new products, wider market, quality
• CAPITAL REPLENISHMENT• LABOR RELATIONS
Multiobjective Problems
• Energy Policy health, environment, self-determination
• Administration budgeting, setting objectives
• Government services, location, tax rates
• Water Resources Management• NASA project selection
• MIS system selection
• POM vendor selection
Finnish Energy Policy
• Finland running out of energy in early 1980s• alternatives:large nuclear
large coalconservation & small plants
• 1984 2 companies applied for a nuclear plant• hot issue• Hamalainen built AHP DSS for interested users
HierarchyF in n ish E n e rg y H ie ra rchy
ch eapso u rces
fo re igntra de
ca p ita lre so u rces
n a tion a l e co no m y
n a tion a lre so u rces
p o llu tionre d uc tion
a cc id e nta vo id an ce
h e a lth sa fe ty & en v iro n m e nt
in de pe nd en ce ce n tra liza tion co op e ra tion
p o lit ica l
e n e rg y p o licy
alternatives of nuclear, coal, & conservation below each lower element
•Used by members of Parliament
•after Chernobyl, dropped nuclear
Selection Techniques
many techniques exist to support selection decisions
• multi-attribute utility theory (MAUT)• simple multi-attribute rating technique
(SMART)• analytic hierarchy process (AHP)• French methods (outranking)• Russian methods (ordinal)
MAUT concepts
rigorously measure value vj
• identify what is important (hierarchy)• identify RELATIVE importance (weights wk)• identify how well each alternative does on each
criterion (score sjk)
• can be linear vj = wk sjk
• or nonlinear vj = {(1+Kkjsjk) - 1}/K
MAUT concepts
• basis: there is a single dimensional value measure – it is cardinal, can be used for ranking
• analyst’s job - find that function – (measure accurately)– scores– weights
caveats
• people buy insurance (expected payoff < cost) because they avoid risk
• people gamble (expected payoff << cost) because they are entertained
• utility theory NORMATIVE (how we SHOULD act)• utility not necessarily additive
[value of 8 eggs not always = 4x(value of 2 eggs)]money CAN serve as utility measure
conclusions
• MAUT considered the “scientific” approach• focuses:
– measure as accurately as possible– identify utility function as accurately as
possible– be as objective as possible
SMART
• MAUT is a little abstract– difficult to accurately develop tradeoffs
• SMART based on the same theory– simpler implementation– linear form– direct entry of relative scores & weights
SMART technique
1. identify person whose utilities are to be maximized2. identify the issue or issues3. identify the alternatives to be evaluated4. identify the relevant dimensions of value for evaluating
alternatives (attribute scales)5. rank the dimensions in order of importance6. rate dimensions in importance, preserving ratios7. sum the importance weights, & divide by total(wi)8. measure how well each alternative does on each dimension(sij)9. U = wi sij
points
• in Step 4, limit criteria– there are only so many things a human can keep
track of at one time– 8 plenty– if weight extremely low, drop
methodology
• Step 4: Jobs: Big 5 firm, dot.com, local bank• Step 5: rank order criteria
– Experience (no value to cutting edge); – Pay ($25k to $50k); – Location (unattractive to great);– Workload (40 hours/week to 80 hours/week)– Travel (very heavy to a little travel)
• Step 6: rate dimensions– least important = 10: travel = 10 workload = 15
location = 20 pay = 30 experience = 45
methodology
Step 7: Develop weights
Divide by total check: 100 for bestaverage
Experience 45/120 = 0.375 100/260 = 0.385 0.38
Pay 30/120 = 0.250 70/260 = 0.269 0.26
Location 20/120 = 0.167 40/260 = 0.154 0.16
Workload15/120 = 0.125 30/260 = 0.115 0.12
Travel 10/120 = 0.083 20/260 = 0.077 0.08
methodology
• purpose of swing weighting– Consider difference in scales– The input is admittedly an approximation– Giving values based on a different perspective
• additional check
• should yield greater accuracy
scores
• Step 8: score each alternative on each criterion• need as objective a scale as you can get• doesn’t have to be linear
0 worst ideal 1.0Experience none (0) focused (0.3) general (0.9) cutting edge (1.0)Pay $25k (0) $30k (0.5) $35k (0.7) $40k (0.8) $50k (1.0)Location bad (0) Dallas (0.7) Austin (0.9) Bryan (1.0)Workload 80 hr (0) 70 hr (0.2) 50 hr (0.8) 40 hr (1.0)Travel excessive (0) lots (0.3) none (0.4) a little (1.0)
Scores
Big 5 Dot.com Local bank
Experience General 0.9 CutEdge1.0 Focused 0.3
Pay $40k 0.8 $35k 0.7 $30k 0.5
Location Dallas 0.7 Austin 0.9 Bryan 1.0
Workload 70 hr 0.2 50 hr 0.8 $40k 1.0
Travel Lots 0.3 10% 1.0 None 0.4
calculation of value
Step 9:U = wi sij
EXP PAY LOC WOR TRAweights 0.38 0.26 0.16 0.12 0.08scores: TOTALSBig 5 0.9 0.8 0.7 0.2 0.3 0.710Dot.com 1.0 0.7 0.9 0.8 1.0 0.826Local bank 0.3 0.5 0.1 0.1 0.4 0.304
recommends the Dot.com
SMART
• provides a very workable means to implement the principles of MAUT
• in fact, it can be MORE accurate than MAUT(more realistic scores, tradeoffs)
identify criteriadevelop scores over criteria
identify alternatives available, measure scoressimple calculation
selecting nuclear depository
Keeney, An analysis of the portfolio of sites to characterize for selecting a nuclear repository, Risk Analysis 7:2 [1987]
DOE - dump nuclear waste - selected Hanford, WANAS criticized selection method - said use MAUTIDENTIFY OBJECTIVE HIERARCHY
objectives attributes measuresDETERMINE RELATIVE IMPORTANCE
lottery tradeoffsRANK by value = weights x scores
DOE objectives
• at depository worker health effects worker fatalities
public health effects public fatalities
• in transit worker health effects worker fatalities
public health effects public fatalities
• environmental aesthetic degradation biological
degradation of archaeological, historical & cultural properties
• socioeconomic• cost repository costs waste transportation costs
Nuclear Depository
• MAUT separated facts from values• explicit professional judgments identified• 14 criteria• each alternative’s value on each criterion measured with
metric making sense relative to the decision (radiation - expected deaths rather than rads)
• interviewed policy makers for tradeoffs
Nuclear Depository
• Keeney comments:– the four policy makers tended to
share values– “public utility probably should be
linear”
• ended up digging at Yucca Mountain, Carlsbad• catch - can’t use either
Hens Pastijn & Struys, “Multicriteria Analysis of the Burden Sharing in the European Community,” EJOR 59 1992 248-261
• European Community– 1958 to 1974 financed by direct contributions
by member states– Treaty of Rome fixed proportional
contributions reflecting ability, advantage– disputes about distribution of funds since early
1970s
• Study of equity of present system
European Community revenues
• External tariff - 20.1% in 1989
• agricultural import levies - 2.9%
• sugar storage levies - 2.9%
• VAT contributions - 56.8%– on goods and services
– 1988 added element based on GNP
• GDP-based contributions - 17.2%
European Community Financing - 1989
Percent of EC Funding Contributed
Germany 26.4% Belgium 4.1%France 20.5% Denmark 2.2%Italy 15.4% Greece 1.2%Great Britain 14.8% Portugal 1.1%Spain 7.4% Ireland 0.8%Netherlands 6.0% Luxemburg 0.2%
European Community Financing
• Problems:– country of port of entry may not be
destination (Rotterdam effect) but customs collected in the Netherlands
– Belgium, Denmark, Germany, Ireland, Luxembourg & the Netherlands paid more than their relative share of GDP
– BENEFIT PRINCIPLE - those who benefit should pay the tax
Reform Proposals
• 1976 Financial Mechanism: refund payable if contribution significantly higher than proportionate share of GNP– didn’t work as planned
• 1984 corrective mechanism: rebate of 66% of difference between VAT payment & budget expenditure share
criteria
• GDP/population
• POL - political willingness to cooperate
• EX/GDP - exports per GDP
• BEN/POP - EC payments/population– USED AHP TO GET WEIGHTS!
Weight Sets
Scen 1 Scen 2 Scen 3 Scen 4 Scen 5
GDP/POP.25 .4 .53 .53 1.0
POL .25 .4 .27 .13 -
EX/GDP .25 .05 .07 .07 -
BEN/POP.25 .15 .13 .27 -
Proportional Contributions
1989 Scen 1 Scen 2 Scen 3 Scen 4 Scen 5Germany 26.36 26.11 26.10 26.39 26.33 26.22France 20.49 21.59 21.79 21.60 21.45 21.09Italy 15.43 17.23 17.50 17.22 17.07 17.30Great Britain 14.77 14.51 14.51 14.87 15.16 15.74Spain 7.36 6.25 6.37 6.28 6.27 6.27Netherlands 5.97 5.60 5.37 5.29 5.26 5.09Belgium 4.12 3.48 3.31 3.25 3.24 3.23Denmark 2.19 2.48 2.40 2.45 2.51 2.43Greece 1.23 1.09 1.06 1.06 1.09 1.06
conclusions
• Great Britain should pay more if weight higher for progressivity
• Italy should pay less than GDP, but more than they currently do
• France & Denmark should pay more
• smaller countries should pay less
Disposition of Weapons Grade Plutonium
end of cold war
desire for disarmament
want to get rid of plutonium
Clinton Directive
September 1993
• Where possible, eliminate stockpiles of HEU & Pu, ensure they are subject to highest standards of safety, security, international accountability
• Try to purchase HEU from former USSR & other countries and convert to reactor fuel
• Start comprehensive review of long-term options for Pu disposition, considering technical, nonproliferation, environmental, budgetary, & economic factors; invite international participation
Problem Scope
• about 50,000 tons of Pu is surplus in US
• about twice that amount surplus in former USSR
• form is pits (warheads)
at plants ready to make warheads
at breeder reactors (Pu production facilities)
contaminated waste (gloves, etc.)
Plutonium Characteristics
• artificial• EXTREMELY toxic• very long half-life (centuries)• NOT a particularly efficient reactor fuel,
but can be used– if used in reactors, there still would be about 92% of Pu
left over (but it would not be suitable for weapons)– lots of other spent fuel Pu, but has natural barrier
(you die if you pick it up)
Disposition Process
• transport warhead Pu to oxidation site
• oxidize Pu to PuOx
• Process– vitrify: apply radionuclide, encase in matrix– borehole: vitrify (or none)– reactor: burn
• permanent storage
Decision Process
• Notice of Intent for Programmatic Environmental Impact Statement 21 Jun 1994
• Department of Energy– Office of Fissile Materials Disposition
• want Documented Record of Decision– phase 1: SCREENING 17 Mar 95 41 options down to 11– phase 2: multiattribute analysis down to 1 - 3– phase 3: final decision
Screening Criteria
• disposition long term storage– resistance to theft & diversion by unauthorized parties *– resistance to retrieval, extraction, & reuse by host nation– technical viability *– environmental, safety, & health *– cost effectiveness *– timeliness *– foster progress & cooperation with Russia and others *– public & institutional acceptance *– additional benefits
Disposition Options
• storage options– no disposal action baseline– radiation barrier alloy X:open-ended, ES&H
• immobilization with radionuclides– underground nuclear detonation X: ES&H, licensing/regulatory– borosilicate glass immobilization (DWPF) X: ES&H, cost– borosilicate glass immobilization (new) reasonable– ceramic immobilization reasonable– electrometallurgical treatment reasonable– borosilicate glass oxidation/dissolution reasonable
Disposition Options
• direct disposal options– direct emplacement in HLW repository X: retrievable, time– deep borehole (immobilized) reasonable– deep borehole (direct emplacement) reasonable– discard to WIPP X: capacity– hydraulic fracturing X: technical viability– deep well injection X: ES&H– injection into continental magma X: technical viability, ES&H– melting in crystalline rock X: technical viability, ES&H– disposal under ice caps X: technical viability, ES&H– seabed (placement on ocean floor) X: technical viability– ocean dilution X: ES&H, treaty– deep space launch X: retrievability, ES&H
Disposition Options
• Reactor & Accelerator Options– Euratom MOX fabrication/reactor burning reasonable– existing light water reactors (LWRs) reasonable– partially completed LWRS reasonable– evolutionary or advanced LWRS reasonable– naval propulsion reactors X: transparency– modular helium reactors (MHRS) X: technical maturity– CANDU heavy water reactors reasonable– ALMRS with pyroprocessing X: technical maturity, ES&H– accelerator conversion X: technical maturity– LWRS with reprocessing X:theft diversion, policy– ALMRS with recycle X: technical maturity, policy– particle bed, molten salt reactors X: technical maturity
Phase 2: MAUT Analysis
• Decision maker - Secretary of Energy• Project manager - Office of Fissile
Materials Disposition• Technical Analysis - National
Laboratories– Livermore, Oak Ridge, Sandia
• MAUT Framework - Pantex– UT, Texas A&M
Phase 2 Purpose
• to generate a multiattribute utility modeloption score=sum(weights*obj scores)
• National Laboratories - give accurate estimates of each option’s score on each objective
• OFMD - source of relative weights
Phase 2 Objectives
evolutionary - this was the initial set• non-proliferation max resistance to theft from unauthorized parties
max resistance to diversion by host nationmax international cooperation & compliance
• operational effective max technical viabilitymax cost effectivenessmax timelinessmax additional benefits
• env, saf, & health protect human health & safetyprotect the natural environmentprotect the human environment
• public & institutional acceptance
Phase 2 Objectives
NonProliferation Theft material characteristicsenvironmentsafeguards & security
Diversion material characteristicsenvironmentsafeguards & security
Irreversibility formlocation
International Cooperation Russiancivil use of plutonium
Timeliness start yeartime to complete
Phase 2 Objectives
Operational Effectiveness Technical MaturityCostInvestment CostLife Cycle Cost
Environment, Safety, & HealthHuman Health & SafetyNatural EnvironmentSocio-Economic
(last 3 measures had many sub-measures)
BANKADVISOR
• Mareschal & Brans, EJOR [1991]• use PROMETHEE as a bank DSS• evaluate firms relative to their competitors• input balance sheets, income statements (4 yr)• identify ratios
– management• commercial• industrial• financial
BANKADVISOR
• PHASE I: display firm financial datafirm specific
• PHASE II: industrial evaluationcomparative
• each firm an alternative• criteria types: solvency rations
liquidity ratiosprofitability ratiosmanagement ratios
Croatian Highways
• Mladineo, Lozic, Stosic, Mlinaric & Radica, EJOR [1992]
• pick highway route• 4 alternatives (2 coastal, 2 inland)• interdisciplinary local interests
social interests
Croatian Highways
• 27 criteria• TRAFFIC• ENGINEERING/TECHNICAL• CIVIL ENGINEERING• DEMOGRAPHIC• ENVIRONMENTAL• SOCIO-ECONOMIC
Jordanian Water
• Abu-Taleb & Mareschal EJOR [1995]
• 18 CRITERIA:over time, government had developed 18these prioritized by PROMETHEE II study
• groundwater quality, quantity, extractionsconservation, cost, supply, efficiency
• sanitation, output value, surface quality& quantity• irrigated area, energy, land quality, sedimentation, recreation, air
quality, foreign labor
Jordanian Water
• Constraints– capital budget– operating budget– geographical dispersion– incompatability (bar overlapping combinations)
• PROMETHEE V gives optimal portfolio with net flows as objective function coefficients