Title: Integration of prospect theory into PROMETHEE - a case study concerning sustainable bioenergy concepts

Authors: Nils Lerche; Jutta Geldermann

Addresses: Chair of Production and Logistics, Georg-August-University Göttingen, Platz der Göttinger Sieben 3, 37073 Göttingen, Germany ' Chair of Production and Logistics, Georg-August-University Göttingen, Platz der Göttinger Sieben 3, 37073 Göttingen, Germany

Abstract: An important objective of outranking methods is that the decision maker should be able to incorporate any argument into the process to achieve better awareness of the decision problem. However, in order to represent actual preferences of the decision maker, consideration of behavioural effects appears to be necessary. In this paper, a new approach that integrates findings from prospect theory into PROMETHEE is illustrated. In particular, the elements of reference dependency and loss aversion are incorporated. For this purpose, it is necessary to define an adequate reference alternative. Moreover, the existing preference functions and the way of aggregating pairwise comparisons have been adjusted. In order to test the newly developed approach, it is applied using an existing decision matrix from a joint research project concerned with the identification of a sustainable bioenergy concept. Finally, the results as well as potential advantages and challenges of the new approach are discussed.

Keywords: behavioural effects; sustainability; case study; sustainable bioenergy; prospect theory; PROMETHEE; loss aversion; reference dependency; pairwise comparisons; sustainable development; decision making.

DOI: 10.1504/IJMCDM.2015.074085

International Journal of Multicriteria Decision Making, 2015 Vol.5 No.4, pp.309 - 333

Received: 01 May 2014
Accepted: 17 Feb 2015

Published online: 08 Jan 2016 *

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