Risk-neutral decision-maker

Once the scheduling decisions have been assessed in each possible scenario by Eqs. (8.4) and (8.5) calculates the expected profit by considering the scenarios probability of occurrence (ps). The expected profit is the LP objective function under the assumption that the decision maker is neutral about risk. 

The above stochastic model takes a decision merely based on first-stage and expected second-stage costs leading to an assumption that the decision-maker is risk-neutral. The generic representation of risk can be written as ... 

A risk-neutral decision maker will find the expected utility of a gamble to be the same as the utility of the gamble s expected value. That is, expected M(gamble) = (gamble s expected value). For a risk-averse decision maker, expected M(gamble) < (gamble s expected value) for a risk-... 

As to environmental risk, the decision maker can express neutral risk behavior and this can be justified by the fact that small parts of the environmental areas in these pipeline sections can be recovered. 

In this framework is proposed the use of utility theory to evaluate risk in each criterion. It allows to consider the probability and the consequence value for decision maker of each state of nature together providing a metric for each risk dimension and also the decision maker behavior (probe, neutral and risk averse) in each risk dimension. In this phase it is made an elicitation of decision maker s utihty for each alternative in each risk dimension considering aU possible states of nature. 

---