Modeling of robustness against severe uncertainty

Abstract

Decision-making in the face of severe uncertainty is an onerous task. The difficulty here is that the severity of the uncertainty hinders the quantification of the likelihood of future events, thereby exposing decision-making to unforeseen risks. Unsurprisingly, the state of the art is such that no fully satisfactory formula for dealing with problems involving decision-making under severe uncertainty exists. This paper examines some of the conceptual, methodological and practical aspects of this important area of decision theory, with the emphasis being on the modeling aspects of robustness against severe uncertainty.