Strategic Planning for

2 3 " If a man will begin with certainties, he shall end in doubts: but if he will be content to begin with doubts, he shall end in certainties. "-Sir Francis Bacon (1561-1626) " The only certainty is that everything is uncertain. "-Pliny the Elder (23-79 AD) A riddle about decisions under uncertainty A minister of transport had to choose between two major railway designs, both of which had a very uncertain and yet unknown price-performance. Before making a decision, there was only time to do one simulation study to estimate the price-performance of one of the alternatives. The chief system engineer had a clever idea to guarantee that the minister would choose the better alternative with a probability of more than 50%. He advised to flip a coin and to do the simulation study for one of the alternatives to find PP1. He let the minister make a wild guess WG for a reasonable price-performance and advised to decide as follows: If PP1 > WG then choose alternative 1. If PP1<=WG then choose alternative 2. He convinced the minister that his chance was indeed >50%. How? There are three possibilities: (a) WG >= Max[PP1,PP2] (b) WG< Min[PP1,PP2] (c) Min<=WG1/2 and this holds for every wild guess and all possible probabilities P(a), P(b) and P(c). Is this true? I am very grateful to MIT and my supervisors for giving me the opportunity to experience research in one of the top universities and work with the best people in the field. My supervisors at the University of Groningen, Professor John Simons and Professor Henk Sol, helped me finish the thesis in Groningen. Professor Simons' remarks were right to the point when it came to giving focus to my thesis and smoothing out the rough edges. This improved my writing immensely. I am also much obliged to Professor Sol who helped me with establishing contacts with MIT and finding a topic that was fit for my studies. His creative suggestions for the later chapters were very inspiring. Friends and family have supported me throughout the writing of my thesis. I especially want to mention Frank Futselaar, Bianca Pander, Dennis Bodewits and Franka Hummels as people whose intellect and sense of humor have encouraged me to …