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Portfolio Decision Analysis: Lessons from Military Applications

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Portfolio Decision Analysis

Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 162))

Abstract

We review the use of portfolio decision analysis in military applications, such as weapon systems, types of forces, installations, and military research and development projects. We start by comparing military and commercial portfolio problems in general, discussing the distinguishing characteristics of the military decision environment: hostile and adaptive adversaries, a public decision process with multiple stakeholders, and high system complexity. Then we list and summarize 24 military DA applications published from 1992 to 2010. We find that the most widespread prominent feature of these applications is the careful modeling of value from multiple objectives. Mathematical optimization is not so common, but it can be important when a large number of interdependencies or side constraints makes it hard to find good feasible candidate portfolios. Quantitative methods of accounting for risk are surprisingly rare, considering the high level of uncertainty in the military environment. We analyze six of the applications in more detail, looking at how they model portfolio value calculation, swing weight assessment, constraints and dependencies, and uncertainty and risk. An appendix provides a recommended procedure for portfolio decision analysis based on the authors’ experience and the applications reviewed.

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Notes

  1. 1.

    Our experience is that is surprisingly difficult to obtain a complete list of the alternatives, especially in organizations with projects in many classification levels.

  2. 2.

    Many people like to place very important, high variation in upper right corner, or cell C3.

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Authors and Affiliations

  1. Department of Systems Engineering, US Military Academy, West Point, New York, NY, 10996, USA

    Roger Chapman Burk & Gregory S. Parnell

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  1. Roger Chapman Burk
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  2. Gregory S. Parnell
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Correspondence to Roger Chapman Burk .

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Editors and Affiliations

  1. , Systems Analysis Laboratory, Aalto University School of Science and T, Aalto, 00076, Finland

    Ahti Salo

  2. Dept. Management Science &, Information Systems, University of Massachusetts, Boston, Morrissey Blvd. 100, Boston, 02125, Massachusetts, USA

    Jeffrey Keisler

  3. , Department of Management, London School of Economics, Houghton Street, London, WC2A 2AE, Montserrat

    Alec Morton

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Burk, R.C., Parnell, G.S. (2011). Portfolio Decision Analysis: Lessons from Military Applications. In: Salo, A., Keisler, J., Morton, A. (eds) Portfolio Decision Analysis. International Series in Operations Research & Management Science, vol 162. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-9943-6_14

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