An inexact mixed risk-aversion two-stage stochastic programming model for water resources management under uncertainty

Li, W.; Wang, B.; Xie, Y. L.; Huang, G. H.; Liu, L.

An inexact mixed risk-aversion two-stage stochastic programming model for water resources management under uncertainty

2015

Li, W. | Wang, B. | Xie, Y. L. | Huang, G. H. | Liu, L.

Uncertainties exist in the water resources system, while traditional two-stage stochastic programming is risk-neutral and compares the random variables (e.g., total benefit) to identify the best decisions. To deal with the risk issues, a risk-aversion inexact two-stage stochastic programming model is developed for water resources management under uncertainty. The model was a hybrid methodology of interval-parameter programming, conditional value-at-risk measure, and a general two-stage stochastic programming framework. The method extends on the traditional two-stage stochastic programming method by enabling uncertainties presented as probability density functions and discrete intervals to be effectively incorporated within the optimization framework. It could not only provide information on the benefits of the allocation plan to the decision makers but also measure the extreme expected loss on the second-stage penalty cost. The developed model was applied to a hypothetical case of water resources management. Results showed that that could help managers generate feasible and balanced risk-aversion allocation plans, and analyze the trade-offs between system stability and economy.

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