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Study on Spectral Risk Measure in Stochastic Capacity Planning Problem

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Executive Summary

Capacity planning problem is an important field in operational research. Stochastic capacity planning is more valuable within uncertain environment which is more realistic. Popular decision risk measure tool is Expected Downside Risk (EDR), and it is a useful method calculating decision risk. The shortage of EDR is that all risk is put on the same level, which could not distinguish between tiny risk and huge risk. This paper introduces spectral risk measure into stochastic capacity planning problem to describe decision makers' risk aversion detail.

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