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A Formal, Decision-Theoretic Approach to Flexibility and Robustness

Roger Pye
The Journal of the Operational Research Society
Vol. 29, No. 3 (Mar., 1978), pp. 215-227
DOI: 10.2307/3009448
Stable URL: http://www.jstor.org/stable/3009448
Page Count: 13
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A Formal, Decision-Theoretic Approach to Flexibility and Robustness
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Abstract

Traditional decision-making techniques only deal with a limited type of uncertainty: that which can be foreseen sufficiently to be expressed as a number of alternate moves between which nature will choose. A plan is formulated which specifies how the decision-maker should respond to nature's moves. Such a plan makes no allowance for uncertainty which could not be foreseen. Unforeseeable uncertainty can only be dealt with if the decision-maker's response to nature's moves is not fixed in advance but is itself uncertain. Flexibility is then defined as the entropy of that uncertainty. It is a measure of both the number of alternative sequences of moves which are open to the decision-maker and his attitude to them. Robustness is a way of trading off flexibility against expected value as estimated under foreseeable uncertainty. The cost of flexibility may be estimated and controlled.

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