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Pré-Publication, Document De Travail Année : 2024

A game to unfold decision risks under uncertain probabilities of extreme events

Résumé

Making decisions in an uncertain environment is the daily routine of most decision makers (if not most human beings). This process naturally defines the notion of risk, that comes from the occurrence of hazards. One key illustration is linked to investments in large infrastructures in a climate change context, which alters the nature and properties of hazards. Idealized settings help understanding the nature of decision risks, when the physical and statistical properties of hazards change, e.g. due to climate change. This paper describes the mathematics of a game that illustrates the risks behind decisions. We explain that, in some cases, optimal gain and the risk of ruin do not necessarily lead to the same choices, especially when the hazard probabilities are uncertain. The goal of this paper is to explain to a general audience how to use available information for proper decision making. Hence, this paper serves as an advanced guide to teachers or climate researchers who are interested in outreach, and explaining the theory behind the game.
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Dates et versions

hal-04534523 , version 1 (05-04-2024)

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  • HAL Id : hal-04534523 , version 1

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Pascal Yiou, Pablo Suárez, Janot Mendler de Suarez. A game to unfold decision risks under uncertain probabilities of extreme events. 2024. ⟨hal-04534523⟩
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