Article ID: | iaor2014116 |
Volume: | 211 |
Issue: | 1 |
Start Page Number: | 433 |
End Page Number: | 446 |
Publication Date: | Dec 2013 |
Journal: | Annals of Operations Research |
Authors: | Sitarz Sebastian |
Keywords: | compromise programming, decision trees, stochastic dominance, lotteries |
This paper presents a method of decision making with returns in the form of discrete random variables. The proposed method is based on two approaches: stochastic orders and compromise programming used in multi‐objective programming. Stochastic orders are represented by stochastic dominance and inverse stochastic dominance. Compromise programming uses the augmented Tchebycheff norm. This norm, in special cases, takes form of the Kantorovich and Kolmogorov probability metrics. Moreover, in the paper we show applications of the presented methodology in the following problems: projects selections, decision tree and choosing a lottery.