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Operations Research Proceedings 2014 pp 363–368Cite as

Integration of Prospect Theory into the Outranking Approach PROMETHEE

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Abstract

Outranking methods as a specific application of Multi-Criteria Decision Analysis (MCDA) are applied to structure complex decision problems as well as to elicitate the decision makers preferences. Therefore, a consideration of behavioral effects within outranking-methods seems to be meaningful. Several behavioral effects and biases have been identified in previous studies, however, only few approaches exist to consider such behavioral issues within the application of MCDA-methods explicitly. The prospect theory developed by Kahneman and Tversky (1979) represents one of the most prominent theories from behavioural decision theory. Their findings concerning the decision behaviour of humans, e.g. loss aversion or reference dependency, are broadly supported and confirmed through a variety of empirical research. Hence, the aim of the presented paper is to integrate these elements from prospect theory within the outranking approach PROMETHEE. For that purpose, an additional discrete reference alternative is incorporated. A case study concerning the sustainable usage of biomass for energy conversion illustrates the new developed method.

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Acknowledgments

This research is funded by a grant of the Ministry of Science and Culture of Lower Saxony and Volkswagenstiftung. It is part of the joint research project Sustainable use of bioenergy: bridging climate protection, nature conservation and society with a duration from 2009 till 2014.

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Authors and Affiliations

  1. Chair of Production and Logistics, Georg-August-University Göttingen, Platz der Göttinger Sieben 3, 37073, Göttingen, Germany

    Nils Lerche & Jutta Geldermann

Authors
  1. Nils Lerche
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  2. Jutta Geldermann
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Corresponding author

Correspondence to Nils Lerche .

Editor information

Editors and Affiliations

  1. Operations Research, RWTH Aachen University, Aachen, Germany

    Marco Lübbecke

  2. Lehrstuhl II für Mathematik, RWTH Aachen University, Aachen, Germany

    Arie Koster

  3. RWTH Aachen University, Aachen, Nordrhein-Westfalen, Germany

    Peter Letmathe

  4. E.ON Energy Research Center, RWTH Aachen University, Aachen, Nordrhein-Westfalen, Germany

    Reinhard Madlener

  5. Management Science, RWTH Aachen University, Aachen, Nordrhein-Westfalen, Germany

    Britta Peis

  6. Chair of Operations Management, RWTH Aachen University, Aachen, Germany

    Grit Walther

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Lerche, N., Geldermann, J. (2016). Integration of Prospect Theory into the Outranking Approach PROMETHEE. In: Lübbecke, M., Koster, A., Letmathe, P., Madlener, R., Peis, B., Walther, G. (eds) Operations Research Proceedings 2014. Operations Research Proceedings. Springer, Cham. https://doi.org/10.1007/978-3-319-28697-6_51

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