Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid

Mohsen Rajabpour; Mohammad Yousefvand; Robert Mulligan; Narayan B. Mandayam

doi:10.3390/en14217134

Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid

Energies ◽

10.3390/en14217134 ◽

2021 ◽

Vol 14 (21) ◽

pp. 7134

Author(s):

Mohsen Rajabpour ◽

Mohammad Yousefvand ◽

Robert Mulligan ◽

Narayan B. Mandayam

Keyword(s):

Decision Making ◽

Solar Energy ◽

Smart Grid ◽

Prospect Theory ◽

Time Window ◽

Behavioral Model ◽

Probability Weighting ◽

Available Energy ◽

The Future ◽

Temporal Horizon

We study prosumer decision-making in the smart grid in which a prosumer must decide whether to make a sale of solar energy units generated at her home every day or hold (store) the energy units in anticipation of a future sale at a better price. Specifically, we enhance a Prospect Theory (PT)-based behavioral model by taking into account bounded temporal horizons (a time window specified in terms of the number of days) that prosumers implicitly impose on their decision-making in arriving at “hold” or “sell” decisions of energy units. The new behavioral model for prosumers assumes that in addition to the framing and probability weighting effects imposed by classical PT, humans make decisions that will affect their lives within a bounded temporal horizon regardless of how far into the future their units may be sold. Modeling the utility of the prosumer with parameters such as the offered price on a day, the available energy units on a day, and the probabilities of the forecast prices, we fit the PT-based proposed behavioral model with bounded temporal horizons to prosumer data collected over 10 weeks from 57 homeowners who generated surplus units of solar power and had the opportunity to sell those units to the local utility at the price set that day by the utility or hold the units for sale in the future. For most participants, a model with a bounded temporal horizon in the range of 1–6 days provided a much better fit to their responses than was found for the traditional EUT-based model, thus validating the need to model PT effects (framing and probability weighting) and bounded temporal horizons imposed in prosumer decision-making.

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The probability weighting of decision-making under heuristics – Are availability heuristics and gambler’s fallacy subject to the possibility effect of prospect theory?

AEA Randomized Controlled Trials ◽

10.1257/rct.8298-1.1 ◽

2021 ◽

Author(s):

Francisco Pitthan

Keyword(s):

Decision Making ◽

Prospect Theory ◽

Probability Weighting ◽

Gambler’S Fallacy ◽

Gambler's Fallacy

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Dopaminergic drug effects on probability weighting during risky decision-making

10.1101/171587 ◽

2017 ◽

Cited By ~ 2

Author(s):

Karita E. Ojala ◽

Lieneke K. Janssen ◽

Mahur M. Hashemi ◽

Monique H. M. Timmer ◽

Dirk E. M. Geurts ◽

...

Keyword(s):

Decision Making ◽

Prospect Theory ◽

Risk Taking ◽

Subjective Probability ◽

Probability Weighting ◽

Risky Decision Making ◽

Risky Decision ◽

Placebo Condition ◽

Pathological Gamblers ◽

Dopaminergic Drug

AbstractDopamine has been associated with risky decision-making, as well as with pathological gambling, a behavioural addiction characterized by excessive risk-taking behaviour. However, the specific mechanisms through which dopamine might act to foster risk-taking and pathological gambling remain elusive. Here we test the hypothesis that this might be achieved, in part, via modulation of subjective probability weighing during decision-making. Healthy controls (n = 21) and pathological gamblers (n = 16) played a decision-making task involving choices between sure monetary options and risky gambles both in the gain and loss domains. Each participant played the task twice, either under placebo or the dopamine D2/D3 receptor antagonist sulpiride, in a double-blind, counter-balanced, design. A prospect theory modelling approach was used to estimate subjective probability weighting and sensitivity to monetary outcomes. Consistent with prospect theory, we found that participants presented a distortion in the subjective weighting of probabilities, i.e. they overweighted low probabilities and underweighted moderate to high probabilities, both in the gain and loss domains. Compared with placebo, sulpiride attenuated this distortion in the gain domain. Across drugs, the groups did not differ in their probability weighting, although in the placebo condition, gamblers consistently underweighted losing probabilities. Overall, our results reveal that dopamine D2/D3 receptor antagonism modulates the subjective weighting of probabilities in the gain domain, in the direction of more objective, economically rational decision-making.Significance statementDopamine has been implicated in risky decision-making and gambling addiction, but the exact mechanisms underlying this influence remain partly elusive. Here we tested the hypothesis that dopamine modulates subjective probability weighting, by examining the effect of a dopaminergic drug on risk-taking behaviour, both in healthy individuals and pathological gamblers. We found that selectively blocking dopamine D2/D3 receptors diminished the typically observed distortion of winning probabilities, characterized by an overweighting of low probabilities and underweighting of high probabilities. This made participants more linear in their subjective estimation of probabilities, and thus more rational in their decision-making behaviour. Healthy participants and pathological gamblers did not differ in their risk-taking behaviour, except in the placebo condition in which gamblers consistently underweighted losing probabilities.

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The probability weighting of decision-making under heuristics – Are availability heuristics and gambler’s fallacy subject to the possibility effect of prospect theory?

AEA Randomized Controlled Trials ◽

10.1257/rct.8298-1.0 ◽

2021 ◽

Author(s):

Francisco Pitthan

Keyword(s):

Decision Making ◽

Prospect Theory ◽

Probability Weighting ◽

Gambler’S Fallacy ◽

Gambler's Fallacy

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Sustainability Assessment of Electricity Generation in Niger Using a Weighted Multi-Criteria Decision Approach

Sustainability ◽

10.3390/su13010385 ◽

2021 ◽

Vol 13 (1) ◽

pp. 385

Author(s):

Ramchandra Bhandari ◽

Benjamin Eduardo Arce ◽

Vittorio Sessa ◽

Rabani Adamou

Keyword(s):

Decision Making ◽

Solar Energy ◽

Electricity Generation ◽

Fossil Fuel ◽

Sustainability Assessment ◽

Energy System ◽

Electricity Supply ◽

Sustainability Criteria ◽

Energy Technologies ◽

The Future

The majority of Niger’s population faces a widespread lack of access to electricity. Although the country lies in the Sahara belt, exploitation of solar energy is so far minimal. Due to ongoing fossil fuel exploration in the country, this fuel might dominate the future electricity supply. Today, Niger imports the most of its electricity from Nigeria. There is a need to expand electricity generation and supply infrastructures in Niger. When doing so, it is important to choose a proper set of electricity generation resource/technology that fulfils sustainability criteria. Thus, the objective of this work is to analyze a methodology in order to assess different energy technologies for Niger. A multi-criteria decision approach was selected to assess the most accessible energy system for the country. For this purpose, indicators were developed and weighted for ranking electricity generation options. Altogether 40 indicators are selected under six dimensions (availability, risk, technology, economics, environment and social) to assess eight different alternatives, considering the aggregated results and corresponding scores under each dimension. A merit list of technology and resources for electricity generation presented in this work could support the stakeholders in their decision-making for further projects implementation in the country.

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