Article ID: | iaor20072763 |
Country: | United States |
Volume: | 53 |
Issue: | 7 |
Start Page Number: | 617 |
End Page Number: | 626 |
Publication Date: | Oct 2006 |
Journal: | Naval Research Logistics |
Authors: | Daskin Mark S., Uryasev Stanislav, Shen Zuo-Jun Max, Chen Gang |
Keywords: | risk |
In this paper, we study a strategic facility location problem under uncertainty. The uncertainty associated with future events is modeled by defining alternative future scenarios with probabilities. We present a new model called the α-reliable mean-excess model that minimizes the expected regret with respect to an endogenously selected subset of worst-case scenarios whose collective probability of occurrence is no more than 1 – α. Our mean-excess risk measure is coherent and computationally efficient. Computational experiments also show that the α-reliable mean-excess criterion matches the α-reliable minimax criterion closely.