SMA: Utility function

This window is used for defining the utility function used in stochastic optimization. The basic measure of utility is the expected value of the objective function. If the decision maker is risk averse and wishes to consider also the variation of the objective function value, this model enables inclusion of risk aversity.

The model uses one parameter, ALPHA, to change the degree of risk aversity. When ALPHA = 1, the expected value is given full weight in the utility and the decision maker is risk neutral. With decreasing values of ALPHA, the expected value is given less importance and risk aversion increases. When ALPHA = 0, the decision maker minimizes variation and does not care at all about the expected objective function value, showing extreme risk aversion.