A Formal, Decision-Theoretic Approach to Flexibility and Robustness

Traditional decision-making techniques only deal with a limited type of uncertainty: that which can be foreseen sufficiently to be expressed as a number of alternate moves between which nature will choose. A plan is formulated which specifies how the decision-maker should respond to nature's moves. Such a plan makes no allowance for uncertainty which could not be foreseen. Unforeseeable uncertainty can only be dealt with if the decision-maker's response to nature's moves is not fixed in advance but is itself uncertain. Flexibility is then defined as the entropy of that uncertainty. It is a measure of both the number of alternative sequences of moves which are open to the decision-maker and his attitude to them. Robustness is a way of trading off flexibility against expected value as estimated under foreseeable uncertainty. The cost of flexibility may be estimated and controlled.