© K.Fedra 20071

DSS for Integrated DSS for Integrated Water Resources Water Resources Management (IWRM) Management (IWRM)

DSS for Integrated DSS for Integrated Water Resources Water Resources Management (IWRM) Management (IWRM)

Terms and definitionsTerms and definitions(suggested for self-study)(suggested for self-study)

DDr. Kurt Fedra ESS GmbH, Austriakurt@ess.co.at http://www.ess.co.atEnvironmental Software & Services A-2352 Gumpoldskirchen

DDr. Kurt Fedra ESS GmbH, Austriakurt@ess.co.at http://www.ess.co.atEnvironmental Software & Services A-2352 Gumpoldskirchen

© K.Fedra 20072

Terminology definedTerminology definedTerminology definedTerminology defined• Actor, stakeholder, participantActor, stakeholder, participant• AlternativeAlternative• AttributeAttribute• ChoiceChoice• Compromise, trade-off• Conflict• ConstraintConstraint• Criterion, criteriaCriterion, criteria• Decision matrix• Decision, to decideDecision, to decide• Decision Support System (DSS)Decision Support System (DSS)• Decision variableDecision variable• Dominated, non-dominatedDominated, non-dominated• Feasible, infeasibleFeasible, infeasible• Multi attribute theoryMulti attribute theory• Multi-criteria analysisMulti-criteria analysis• Objectives, multiple objectivesObjectives, multiple objectives

• OptimizationOptimization• Simulation, modelingSimulation, modeling• Scenario, scenario analysisScenario, scenario analysis• Pareto optimality, set, surface• Referene point• Utopia, nadir• Uncertainty• Risk• Robustness, resilience• Instrument, measure•Conservation laws, mass budget• Valuation, CVM, TCM• Economics NPV, EAC• Game theory• Zero sum games• Cooperative games• Win-win solutions

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Terminology definedTerminology definedTerminology definedTerminology defined• Hobsons’ choiceHobsons’ choice• ScoreScore• Pugh methodPugh method• ElicitationElicitation• Preference structurePreference structure• Ranking, orderRanking, order• Cardinal (criteria)Cardinal (criteria)• Ordinal (criteria)Ordinal (criteria)• Nominal (criteria)Nominal (criteria)• NormalizationNormalization• Benefits, non-monetaryBenefits, non-monetary• ComplianceCompliance• Rational choice, maximizationRational choice, maximization• Utility, utility functionUtility, utility function• First order logic

• Modus ponens• Implementation• Efficiency• Equity• Sustainability• Price elasticity• Value (of water)• Investment (EAC, cost recovery)• Operating costs• Cost-benefit analysis• Monetization• Damages, penalties• Demand, Supply• Reliability (of supply)

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Actor, stakeholderActor, stakeholderActor, stakeholderActor, stakeholder Any legitimate participant in the decision Any legitimate participant in the decision

making process, affecting or affected by the making process, affecting or affected by the

underlying issues and problem situation:underlying issues and problem situation:– Major water users, suppliers: e.g., utilities, communities, Major water users, suppliers: e.g., utilities, communities,

irrigation consortia, farmers/associations, industries;irrigation consortia, farmers/associations, industries;

– Governmental regulatory and administrative institutions; Governmental regulatory and administrative institutions;

– Interests groups (commercial, NGOs)Interests groups (commercial, NGOs)

– Academic and research institutions, consultantsAcademic and research institutions, consultants

– MediaMedia

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Alternative:Alternative:Alternative:Alternative:• one of several solutions to the problem;one of several solutions to the problem;

• a set of actions, measures, defined by one a set of actions, measures, defined by one or more decision variables;or more decision variables;

Alternative: L, Alternative: L, aliusalius, other. Webster’s:, other. Webster’s:

• Offering or expressing a choiceOffering or expressing a choice

• A proposition offering choice between two A proposition offering choice between two or more thingsor more things

• One of two or more things to be chosen.One of two or more things to be chosen.

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Attribute:Attribute:Attribute:Attribute:Property, variable, parameter, criterion Property, variable, parameter, criterion

describing a problem or solution describing a problem or solution (alternative); (alternative); measurable (scalar or ordinal)measurable (scalar or ordinal)

Attribute: L. Attribute: L. ad tribueread tribuere, to bestow), to bestow)

• An inherent (measurable) characteristic An inherent (measurable) characteristic

• An object closely related or belonging to a An object closely related or belonging to a specific thingspecific thing

• To regard as a characteristic of a thing To regard as a characteristic of a thing (verb).(verb).

© K.Fedra 20077

Choice:Choice:Choice:Choice:• Option, the power of choosing;Option, the power of choosing;

• Selection, the act of choosing;Selection, the act of choosing;

• A sufficient number or variety to A sufficient number or variety to choose from.choose from.

Choice, (old G, Choice, (old G, koisankoisan, to choose), to choose)

synsyn: option, alternative, preference, : option, alternative, preference, selection, electionselection, election

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Constraint:Constraint:Constraint:Constraint:• A limitation of possible (acceptable) A limitation of possible (acceptable)

attribute values for an alternativeattribute values for an alternative

Constraint:Constraint: L, L, constringereconstringere,, constrict, constrict, constrainconstrain

• The act, result of constrainingThe act, result of constraining::

• To force by imposed stricture, To force by imposed stricture, restriction, or limitationrestriction, or limitation

• To restrict … to a particular modeTo restrict … to a particular mode

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Constraints:Constraints:

CONSTRAINTS CONSTRAINTS are minimal are minimal

or maximal values of or maximal values of

CRITERIA (target values) CRITERIA (target values)

that a feasible alternative that a feasible alternative

must fulfil.must fulfil.

CONSTRAINTS CONSTRAINTS are minimal are minimal

or maximal values of or maximal values of

CRITERIA (target values) CRITERIA (target values)

that a feasible alternative that a feasible alternative

must fulfil.must fulfil.

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Cooperative games:Cooperative games:Cooperative games:Cooperative games:

Payoffs are calculated for coalitions (groups) of players that coordinate their strategies, assuming:

Transferable utilities(sharing of benefits)

Aiming at non-zero sum win-win solutions (increase in resource base)

Payoffs are calculated for coalitions (groups) of players that coordinate their strategies, assuming:

Transferable utilities(sharing of benefits)

Aiming at non-zero sum win-win solutions (increase in resource base)

© K.Fedra 200711

Cooperative games:Cooperative games:Cooperative games:Cooperative games:Assume water is used competitively by• inefficient irrigation (farmer)• high value (agro)industry• Industry provides funds (bank loan)

to farmer to improve irrigation efficiency (flooding drip), using the (future) revenues of the additional income from water saved (increased production value) water market ?

Assume water is used competitively by• inefficient irrigation (farmer)• high value (agro)industry• Industry provides funds (bank loan)

to farmer to improve irrigation efficiency (flooding drip), using the (future) revenues of the additional income from water saved (increased production value) water market ?

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Criterion, criteria:Criterion, criteria:

• Measurable attributes of the problem and decision alternatives;

• valued attributes or components of the system;

• measures of system performance.

• Measurable attributes of the problem and decision alternatives;

• valued attributes or components of the system;

• measures of system performance.

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Criteria examples:Criteria examples:

• Supply/Demand ratio, availability• Reliability of Supply (%)• Efficiencies (water, economic)• Sustainability (content change)• Water quality (BOD, FC, NO3, …)

• Equity, sustainability

• Costs and benefits: $$$ !

• Supply/Demand ratio, availability• Reliability of Supply (%)• Efficiencies (water, economic)• Sustainability (content change)• Water quality (BOD, FC, NO3, …)

• Equity, sustainability

• Costs and benefits: $$$ !

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Criteria and PreferencesCriteria and PreferencesCriteria and PreferencesCriteria and Preferences

• FeasibilityFeasibility (physical/technical, (physical/technical, economic, socio-political: acceptability)economic, socio-political: acceptability)

• Economic efficiencyEconomic efficiency (benefit/cost, net (benefit/cost, net benefit, IRR, opportunity costs)benefit, IRR, opportunity costs)

• ComplianceCompliance (water law, international (water law, international agreements, environmental standards)agreements, environmental standards)

• SustainabilitySustainability (long-term effects)(long-term effects)

• EquityEquity (distribution of costs and benefits)(distribution of costs and benefits)

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Decision, decide:Decision, decide:Decision, decide:Decision, decide:

Decision: L, Decision: L, decideredecidere: : to cut offto cut off• to arrive at a solution that ends to arrive at a solution that ends

uncertainty or dispute about …uncertainty or dispute about …

• to make a choice or judgementto make a choice or judgement

• to come or cause to come to a to come or cause to come to a

conclusionconclusion

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Decision Support System:Decision Support System:Decision Support System:Decision Support System:

A Decision A Decision SupportSupport System is a System is a

• computer based computer based problem solving systemproblem solving system

(HW, SW, data, people)(HW, SW, data, people) that can that can

• assistassist non-trivial non-trivial choicechoice

• between between alternativesalternatives in in

• complex and controversial domains.complex and controversial domains.

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Decision Support System:Decision Support System:Decision Support System:Decision Support System: A DSS provides A DSS provides • structured presentation of problem structured presentation of problem

context context (physical, regulatory, political, economic(physical, regulatory, political, economic),), • and tools for theand tools for the

– design, – evaluation,– selection

of alternatives of alternatives (for non-trivial problems).(for non-trivial problems).

A DSS provides A DSS provides • structured presentation of problem structured presentation of problem

context context (physical, regulatory, political, economic(physical, regulatory, political, economic),), • and tools for theand tools for the

– design, – evaluation,– selection

of alternatives of alternatives (for non-trivial problems).(for non-trivial problems).

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Decision variable:Decision variable:Decision variable:Decision variable:

Attributes of a decision (alternative) Attributes of a decision (alternative) that can be set or defined by the that can be set or defined by the decision maker(s);decision maker(s);

Variables or parameters that define Variables or parameters that define the measures, instruments, the measures, instruments, technologies, strategies, policies technologies, strategies, policies that implement the decision. that implement the decision.

Attributes of a decision (alternative) Attributes of a decision (alternative) that can be set or defined by the that can be set or defined by the decision maker(s);decision maker(s);

Variables or parameters that define Variables or parameters that define the measures, instruments, the measures, instruments, technologies, strategies, policies technologies, strategies, policies that implement the decision. that implement the decision.

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Decision making processesDecision making processesDecision making processesDecision making processesBasic components:Basic components:• Describe (understand) the Describe (understand) the problem problem situation, situation,

background, context, genesis, physiography, background, context, genesis, physiography, resources, stakeholders, rules = awareness) resources, stakeholders, rules = awareness)

• Identify a Identify a preferencepreference structure structure (participation):(participation):– Criteria, Objectives/ConstraintsCriteria, Objectives/Constraints

• Identify or design Identify or design alternativesalternatives, instruments, instruments• EvaluateEvaluate the alternatives, measure their the alternatives, measure their

contribution to the objectivescontribution to the objectives• Rank and selectRank and select an alternative an alternative (participation)(participation)

Basic components:Basic components:• Describe (understand) the Describe (understand) the problem problem situation, situation,

background, context, genesis, physiography, background, context, genesis, physiography, resources, stakeholders, rules = awareness) resources, stakeholders, rules = awareness)

• Identify a Identify a preferencepreference structure structure (participation):(participation):– Criteria, Objectives/ConstraintsCriteria, Objectives/Constraints

• Identify or design Identify or design alternativesalternatives, instruments, instruments• EvaluateEvaluate the alternatives, measure their the alternatives, measure their

contribution to the objectivescontribution to the objectives• Rank and selectRank and select an alternative an alternative (participation)(participation)

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Dominated:Dominated:

DOMINATED alternative:DOMINATED alternative:

There is at least one alternative that There is at least one alternative that

is is better in all criteriabetter in all criteria (or better in (or better in

at least one and equal in all other) at least one and equal in all other)

and thus to be preferred !and thus to be preferred !

DOMINATED alternative:DOMINATED alternative:

There is at least one alternative that There is at least one alternative that

is is better in all criteriabetter in all criteria (or better in (or better in

at least one and equal in all other) at least one and equal in all other)

and thus to be preferred !and thus to be preferred !

© K.Fedra 200721

Economics, NPV, EAC:Economics, NPV, EAC:

Costs and benefits are central criteria of any Costs and benefits are central criteria of any problem or solution (alternative); to problem or solution (alternative); to compare streams of money over time in compare streams of money over time in projects or components of different life time projects or components of different life time and a discount rate (cost of capital).and a discount rate (cost of capital).

NPV: net present value computes the current NPV: net present value computes the current value of (discounted) future costs and value of (discounted) future costs and benefits;benefits;

EAC: equivalent annual cost, combines EAC: equivalent annual cost, combines annualized capital outlays (based on a annualized capital outlays (based on a discounted capital recovery factor) and discounted capital recovery factor) and annual operational costs.annual operational costs.

Costs and benefits are central criteria of any Costs and benefits are central criteria of any problem or solution (alternative); to problem or solution (alternative); to compare streams of money over time in compare streams of money over time in projects or components of different life time projects or components of different life time and a discount rate (cost of capital).and a discount rate (cost of capital).

NPV: net present value computes the current NPV: net present value computes the current value of (discounted) future costs and value of (discounted) future costs and benefits;benefits;

EAC: equivalent annual cost, combines EAC: equivalent annual cost, combines annualized capital outlays (based on a annualized capital outlays (based on a discounted capital recovery factor) and discounted capital recovery factor) and annual operational costs.annual operational costs.

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Efficiency:Efficiency:

is a is a ratioratio of ouput per unit input. of ouput per unit input.

• Economic efficiency: cost per unit Economic efficiency: cost per unit

output or benefit, benefit cost ratio.output or benefit, benefit cost ratio.

• Water efficiency: water use per Water efficiency: water use per

unit output, e.g., hydropower or unit output, e.g., hydropower or

crop production.crop production.

is a is a ratioratio of ouput per unit input. of ouput per unit input.

• Economic efficiency: cost per unit Economic efficiency: cost per unit

output or benefit, benefit cost ratio.output or benefit, benefit cost ratio.

• Water efficiency: water use per Water efficiency: water use per

unit output, e.g., hydropower or unit output, e.g., hydropower or

crop production.crop production.

© K.Fedra 200723

Feasible, infeasible:Feasible, infeasible:

Alternatives can beAlternatives can be• FeasibleFeasible: they meet a set of requirements : they meet a set of requirements

or or CONSTRAINTSCONSTRAINTS (specified (specified a priori)a priori)

• InfeasibleInfeasible: they fail to meet any or all of : they fail to meet any or all of

the the CONSTRAINTSCONSTRAINTS

Alternatives can beAlternatives can be• FeasibleFeasible: they meet a set of requirements : they meet a set of requirements

or or CONSTRAINTSCONSTRAINTS (specified (specified a priori)a priori)

• InfeasibleInfeasible: they fail to meet any or all of : they fail to meet any or all of

the the CONSTRAINTSCONSTRAINTS

© K.Fedra 200724

Game theoryGame theoryGame theoryGame theory

Branch of applied mathematics, economics (von Neumann, Morgenstern 1944):

• Players, (agents, actors, stakeholders) choose

• Strategies that maximise their

• Payoff (return, gain net benefit)

• given the strategies of other agents.

Branch of applied mathematics, economics (von Neumann, Morgenstern 1944):

• Players, (agents, actors, stakeholders) choose

• Strategies that maximise their

• Payoff (return, gain net benefit)

• given the strategies of other agents.

© K.Fedra 200725

Hobson’s choiceHobson’s choiceHobson’s choiceHobson’s choice

Decision problem withDecision problem with

only one alternativeonly one alternative(take it or leave it) (take it or leave it)

Identification or design of alternatives is Identification or design of alternatives is crucial: probability of a good solution crucial: probability of a good solution increases with the number of alternatives !increases with the number of alternatives !

Thomas Hobson (1544-1630), stable owner, offered only Thomas Hobson (1544-1630), stable owner, offered only the horse nearest to the gate: the horse nearest to the gate:

Where to elect there is but one, Tis’ Hobson’s choice, take Where to elect there is but one, Tis’ Hobson’s choice, take that - or none. (Thomas Ward, 1688)that - or none. (Thomas Ward, 1688)

Decision problem withDecision problem with

only one alternativeonly one alternative(take it or leave it) (take it or leave it)

Identification or design of alternatives is Identification or design of alternatives is crucial: probability of a good solution crucial: probability of a good solution increases with the number of alternatives !increases with the number of alternatives !

Thomas Hobson (1544-1630), stable owner, offered only Thomas Hobson (1544-1630), stable owner, offered only the horse nearest to the gate: the horse nearest to the gate:

Where to elect there is but one, Tis’ Hobson’s choice, take Where to elect there is but one, Tis’ Hobson’s choice, take that - or none. (Thomas Ward, 1688)that - or none. (Thomas Ward, 1688)

© K.Fedra 200726

Instrument, measure:Instrument, measure: Instruments, measures, strategies,

policies, are defined in terms of

• Decision variables which define the specific configuration

• Effectiveness (which attributes and criteria will be affected)

• Efficiencies (costs and benefits)

which together define the alternatives.

Instruments, measures, strategies, policies, are defined in terms of

• Decision variables which define the specific configuration

• Effectiveness (which attributes and criteria will be affected)

• Efficiencies (costs and benefits)

which together define the alternatives.

© K.Fedra 200727

Multi-attribute theoryMulti-attribute theory

Multi-Attribute (Utility) Theory is an evaluation scheme that combines several attributes (criteria) in the evaluation of (the utility of) an object, decision, plan, project, …. by using some weighted sum of the individual attributes to arrive at a global overall summary or total evaluation.

Multi-Attribute (Utility) Theory is an evaluation scheme that combines several attributes (criteria) in the evaluation of (the utility of) an object, decision, plan, project, …. by using some weighted sum of the individual attributes to arrive at a global overall summary or total evaluation.

© K.Fedra 200728

Multi-criteria analysisMulti-criteria analysis

Includes a number of methods to arrive at a single evaluation (scoring, and subsequent ranking) for objects, decisions, plans, projects that are described by multiple (and non-commensurable) criteria (see also: multi-attribute theory).

Includes a number of methods to arrive at a single evaluation (scoring, and subsequent ranking) for objects, decisions, plans, projects that are described by multiple (and non-commensurable) criteria (see also: multi-attribute theory).

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Non-zero sum games:Non-zero sum games:Non-zero sum games:Non-zero sum games:

• Some (cooperative) strategies can increase the resource base

• Sum of benefits greater zero

• Non-zero sum games describe HOW TO MAKE A BIGGER CAKE

• Some (cooperative) strategies can increase the resource base

• Sum of benefits greater zero

• Non-zero sum games describe HOW TO MAKE A BIGGER CAKE

© K.Fedra 200730

Objectives, multiple objectivesObjectives, multiple objectives

• Something towards which effort is directed

• An aim or end of action

• Criteria we want to maximize or minimize

Multiple objectives refer to more than one such goal addressed simultaneously in a given decision making situation (see also: multiple criteria)

• Something towards which effort is directed

• An aim or end of action

• Criteria we want to maximize or minimize

Multiple objectives refer to more than one such goal addressed simultaneously in a given decision making situation (see also: multiple criteria)

© K.Fedra 200731

Objectives:Objectives:

OBJECTIVESOBJECTIVES are concepts we wish to are concepts we wish to

maximize or minimize, measured by maximize or minimize, measured by

CRITERIA; several CRITERIA can CRITERIA; several CRITERIA can

contribute to the same OBJECTIVE, contribute to the same OBJECTIVE,

((e.g., to “maximize net benefit”, various costs e.g., to “maximize net benefit”, various costs

and benefits contribute);and benefits contribute);

• Criteria can be (hierarchically) structured Criteria can be (hierarchically) structured

and thus closely related/correlated (bias ?)and thus closely related/correlated (bias ?)

OBJECTIVESOBJECTIVES are concepts we wish to are concepts we wish to

maximize or minimize, measured by maximize or minimize, measured by

CRITERIA; several CRITERIA can CRITERIA; several CRITERIA can

contribute to the same OBJECTIVE, contribute to the same OBJECTIVE,

((e.g., to “maximize net benefit”, various costs e.g., to “maximize net benefit”, various costs

and benefits contribute);and benefits contribute);

• Criteria can be (hierarchically) structured Criteria can be (hierarchically) structured

and thus closely related/correlated (bias ?)and thus closely related/correlated (bias ?)

© K.Fedra 200732

Objectives, example:Objectives, example:

• CriterionCriterion: : net benefitnet benefit

• ObjectiveObjective: : maximize net benefitmaximize net benefit

• ConstraintConstraint: : at least a net benefit of Xat least a net benefit of X

DSS outputDSS output: the values (settings) of the decision : the values (settings) of the decision

variables (instruments applied) to reach some variables (instruments applied) to reach some

targets; the problem may be targets; the problem may be feasiblefeasible (can be (can be

solved) or solved) or infeasibleinfeasible (no possible solution). (no possible solution).

• CriterionCriterion: : net benefitnet benefit

• ObjectiveObjective: : maximize net benefitmaximize net benefit

• ConstraintConstraint: : at least a net benefit of Xat least a net benefit of X

DSS outputDSS output: the values (settings) of the decision : the values (settings) of the decision

variables (instruments applied) to reach some variables (instruments applied) to reach some

targets; the problem may be targets; the problem may be feasiblefeasible (can be (can be

solved) or solved) or infeasibleinfeasible (no possible solution). (no possible solution).

© K.Fedra 200733

Optimization:Optimization:Optimization:Optimization:

Mathematical procedure to find the Mathematical procedure to find the MAXIMUM or MINIMUM of an MAXIMUM or MINIMUM of an OBJECTIVE FUNCTION that may OBJECTIVE FUNCTION that may consist of one or more criteria subject to consist of one or more criteria subject to a set of CONSTRAINTS e.g.:a set of CONSTRAINTS e.g.:

Maximize NET BENEFIT = f(X)Maximize NET BENEFIT = f(X) subject to meeting maximum investment subject to meeting maximum investment

cost limits where f(X) is a model of the cost limits where f(X) is a model of the system that yields net benefit.system that yields net benefit.

Mathematical procedure to find the Mathematical procedure to find the MAXIMUM or MINIMUM of an MAXIMUM or MINIMUM of an OBJECTIVE FUNCTION that may OBJECTIVE FUNCTION that may consist of one or more criteria subject to consist of one or more criteria subject to a set of CONSTRAINTS e.g.:a set of CONSTRAINTS e.g.:

Maximize NET BENEFIT = f(X)Maximize NET BENEFIT = f(X) subject to meeting maximum investment subject to meeting maximum investment

cost limits where f(X) is a model of the cost limits where f(X) is a model of the system that yields net benefit.system that yields net benefit.

© K.Fedra 200734

Optimization:Optimization:

Given: a transfer function (model)

f : Decision Alternative Response

from some set of decision alternatives DASought: an element x0 in DA such that

f(x0) ≤ f(x) for all x in DA ("minimization")

or such that

f(x0) ≥ f(x) for all x in A ("maximization").

Given: a transfer function (model)

f : Decision Alternative Response

from some set of decision alternatives DASought: an element x0 in DA such that

f(x0) ≤ f(x) for all x in DA ("minimization")

or such that

f(x0) ≥ f(x) for all x in A ("maximization").

© K.Fedra 200735

Pareto set or frontier:Pareto set or frontier:

the set of all the set of all non-dominatednon-dominated

alternatives (final selection alternatives (final selection

requires trade-off between requires trade-off between

criteria, explicit or implicit criteria, explicit or implicit

weights)weights)

the set of all the set of all non-dominatednon-dominated

alternatives (final selection alternatives (final selection

requires trade-off between requires trade-off between

criteria, explicit or implicit criteria, explicit or implicit

weights)weights)

© K.Fedra 200736

Preference structure:Preference structure:

Expresses (one or more) decision makers’ preferences, Expresses (one or more) decision makers’ preferences, expectation, aspirations quantitatively. Consists of:expectation, aspirations quantitatively. Consists of:

1.1. A set of CriteriaA set of Criteria with an indication of the with an indication of the optimization direction (minimize, maximize)optimization direction (minimize, maximize)

2.2. ConstraintsConstraints (minimal or maximal acceptable (minimal or maximal acceptable values for some criteria;values for some criteria;

3.3. Objectives, Objectives, all other (unconstrained) criteria all other (unconstrained) criteria (several criteria could contribute to the same (several criteria could contribute to the same objective).objective).

Expresses (one or more) decision makers’ preferences, Expresses (one or more) decision makers’ preferences, expectation, aspirations quantitatively. Consists of:expectation, aspirations quantitatively. Consists of:

1.1. A set of CriteriaA set of Criteria with an indication of the with an indication of the optimization direction (minimize, maximize)optimization direction (minimize, maximize)

2.2. ConstraintsConstraints (minimal or maximal acceptable (minimal or maximal acceptable values for some criteria;values for some criteria;

3.3. Objectives, Objectives, all other (unconstrained) criteria all other (unconstrained) criteria (several criteria could contribute to the same (several criteria could contribute to the same objective).objective).

© K.Fedra 200737

Price elasticity:Price elasticity:

Micro-economic theory, assumes that Micro-economic theory, assumes that the consumption (purchase) of a the consumption (purchase) of a commodity decreases with increasing commodity decreases with increasing price or cost.price or cost.

High elasticity: commercial use;High elasticity: commercial use;

Inelastic: consumption is independent of Inelastic: consumption is independent of price, e.g., water for vital needs.price, e.g., water for vital needs.

Micro-economic theory, assumes that Micro-economic theory, assumes that the consumption (purchase) of a the consumption (purchase) of a commodity decreases with increasing commodity decreases with increasing price or cost.price or cost.

High elasticity: commercial use;High elasticity: commercial use;

Inelastic: consumption is independent of Inelastic: consumption is independent of price, e.g., water for vital needs.price, e.g., water for vital needs.

© K.Fedra 200738

Problem structure:Problem structure:Inputs (initial and boundary conditions)

• Driving conditions (uncontrollable)• Decision variables (controlled)

Outputs (measures of performance):• Objectives (minimize or maximize,

continuous, distance measure)• Constraints (minimal or maximal

levels, binary: feasible or not)

Inputs (initial and boundary conditions)

• Driving conditions (uncontrollable)• Decision variables (controlled)

Outputs (measures of performance):• Objectives (minimize or maximize,

continuous, distance measure)• Constraints (minimal or maximal

levels, binary: feasible or not)

© K.Fedra 200739

Pugh method:Pugh method:Pugh method:Pugh method:MCA method, syn. for Decision Matrix:

• A matrix is used to summarize alternatives and (multiple) criteria;

• Scoring is based on subjective weights defined for (normalized) criteria

• Ranking and selection is based on maximum or minimum score

MCA method, syn. for Decision Matrix:

• A matrix is used to summarize alternatives and (multiple) criteria;

• Scoring is based on subjective weights defined for (normalized) criteria

• Ranking and selection is based on maximum or minimum score

© K.Fedra 200740

Ranking, order:Ranking, order:Ranking, order:Ranking, order:Establishing a sequence of alternatives;

Ranking or order requires cardinal or ordinal criteria.

Complete order requires a single, common criterion (most frequently: monetary cost)

Multiple criteria or attributes only allow a partial order (ranking) that separates dominated from non-dominated (pareto optimal) alternatives.

Establishing a sequence of alternatives;

Ranking or order requires cardinal or ordinal criteria.

Complete order requires a single, common criterion (most frequently: monetary cost)

Multiple criteria or attributes only allow a partial order (ranking) that separates dominated from non-dominated (pareto optimal) alternatives.

© K.Fedra 200741

Rational choiceRational choiceRational choiceRational choice

Is a theory, hypothesis, paradigm, model Is a theory, hypothesis, paradigm, model … based on … based on micro-economicsmicro-economics::

The DM is assumed to choose a set of The DM is assumed to choose a set of actions (decisions) that actions (decisions) that MAXIMIZE MAXIMIZE his/her UTILITY his/her UTILITY given the DM given the DM preferences and expected outcome of preferences and expected outcome of the actions.the actions.

Is a theory, hypothesis, paradigm, model Is a theory, hypothesis, paradigm, model … based on … based on micro-economicsmicro-economics::

The DM is assumed to choose a set of The DM is assumed to choose a set of actions (decisions) that actions (decisions) that MAXIMIZE MAXIMIZE his/her UTILITY his/her UTILITY given the DM given the DM preferences and expected outcome of preferences and expected outcome of the actions.the actions.

© K.Fedra 200742

Rational choiceRational choiceRational choiceRational choice

Assumes that (rational) individuals maximize welfare (individual and collective utility) as they conceive it, forward looking and consistently. G.Becker, 1993

Rational: based on reason

Ratio (L.): computation, reason

Reason: sufficient ground, explanation, logical defense; something (principle, law) that supports a conclusion; drawing of (logical) inferences

Assumes that (rational) individuals maximize welfare (individual and collective utility) as they conceive it, forward looking and consistently. G.Becker, 1993

Rational: based on reason

Ratio (L.): computation, reason

Reason: sufficient ground, explanation, logical defense; something (principle, law) that supports a conclusion; drawing of (logical) inferences

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Reference point:Reference point:Reference point:Reference point:

A point in N dimensional decision space (one value for each of the criteria/dimensions), defined by the DM’s preference structure (default: UTOPIA) that defines scaling and measures of distance for individual (feasible) alternatives.

The feasible alternative closest to the reference point (by some measure of distance) is the optimal (efficient) solution.

A point in N dimensional decision space (one value for each of the criteria/dimensions), defined by the DM’s preference structure (default: UTOPIA) that defines scaling and measures of distance for individual (feasible) alternatives.

The feasible alternative closest to the reference point (by some measure of distance) is the optimal (efficient) solution.

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Robustness, resilience:Robustness, resilience:

Robustness:Robustness: low sensitivity of a low sensitivity of a system (or decision) to changes system (or decision) to changes (uncertainty) in the inputs; implies (uncertainty) in the inputs; implies stabilizing or buffer capacity.stabilizing or buffer capacity.

Resilience:Resilience: the ability of a system to the ability of a system to return to “normal” function after a return to “normal” function after a (major) disturbance; implies self repair (major) disturbance; implies self repair mechanisms.mechanisms.

Robustness:Robustness: low sensitivity of a low sensitivity of a system (or decision) to changes system (or decision) to changes (uncertainty) in the inputs; implies (uncertainty) in the inputs; implies stabilizing or buffer capacity.stabilizing or buffer capacity.

Resilience:Resilience: the ability of a system to the ability of a system to return to “normal” function after a return to “normal” function after a (major) disturbance; implies self repair (major) disturbance; implies self repair mechanisms.mechanisms.

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Simulation, modeling:Simulation, modeling:

The imitative representation of the The imitative representation of the functioning of one system by process functioning of one system by process by another.by another.

Mathemtical modeling: representation of Mathemtical modeling: representation of a physical system by systems of a physical system by systems of equations to describe the system’s equations to describe the system’s evolution in time and space.evolution in time and space.

The imitative representation of the The imitative representation of the functioning of one system by process functioning of one system by process by another.by another.

Mathemtical modeling: representation of Mathemtical modeling: representation of a physical system by systems of a physical system by systems of equations to describe the system’s equations to describe the system’s evolution in time and space.evolution in time and space.

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Scenario analysisScenario analysis

explores the reaction of a system to explores the reaction of a system to changes in the boundary conditions changes in the boundary conditions ((uncontrolled inputsuncontrolled inputs and and control or control or decision variablesdecision variables) on the ) on the performance variables (criteria) in performance variables (criteria) in terms of the objectives and terms of the objectives and constraints of the decision problem: constraints of the decision problem: WHAT … IF ?WHAT … IF ?

explores the reaction of a system to explores the reaction of a system to changes in the boundary conditions changes in the boundary conditions ((uncontrolled inputsuncontrolled inputs and and control or control or decision variablesdecision variables) on the ) on the performance variables (criteria) in performance variables (criteria) in terms of the objectives and terms of the objectives and constraints of the decision problem: constraints of the decision problem: WHAT … IF ?WHAT … IF ?

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Uncertainty:Uncertainty:Uncertainty:Uncertainty:

Uncertainty: inability to measure or forecast with some (specified) precision

Measurement uncertainty:• Principle element (Heisenberg)• Practical element (methodological,

measurement and sampling error)

Uncertainty: inability to measure or forecast with some (specified) precision

Measurement uncertainty:• Principle element (Heisenberg)• Practical element (methodological,

measurement and sampling error)

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Valuation:Valuation:Provides an economic or monetary value for Provides an economic or monetary value for

criteria (e.g., as the basis for cost-benefit criteria (e.g., as the basis for cost-benefit analysis).analysis).

Economic assessment or monetization of Economic assessment or monetization of the costs and benefits of the supply and the costs and benefits of the supply and use of water, water quality, and all use of water, water quality, and all instruments and measures.instruments and measures.

Can be based on:Can be based on:• Market prices (may include subsidies)Market prices (may include subsidies)• Indirect estimates (contingent valuation, Indirect estimates (contingent valuation,

travel cost method).travel cost method).

Provides an economic or monetary value for Provides an economic or monetary value for criteria (e.g., as the basis for cost-benefit criteria (e.g., as the basis for cost-benefit analysis).analysis).

Economic assessment or monetization of Economic assessment or monetization of the costs and benefits of the supply and the costs and benefits of the supply and use of water, water quality, and all use of water, water quality, and all instruments and measures.instruments and measures.

Can be based on:Can be based on:• Market prices (may include subsidies)Market prices (may include subsidies)• Indirect estimates (contingent valuation, Indirect estimates (contingent valuation,

travel cost method).travel cost method).

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Zero-sum games:Zero-sum games:Zero-sum games:Zero-sum games:

• Assumes finite resources independent of strategies

• Game only allocates resources between players

• Sum of all players gains is zero

• Zero sum games describe HOW TO DIVIDE THE CAKE

• Assumes finite resources independent of strategies

• Game only allocates resources between players

• Sum of all players gains is zero

• Zero sum games describe HOW TO DIVIDE THE CAKE