Journal of Korean Society of Industrial and Systems Engineering (산업경영시스템학회지)

Society of Korea Industrial and System Engineering (한국산업경영시스템학회)
권호 표지

The Effect of Meteorological Information on Business Decision-Making with a Value Score Model

가치스코어 모형을 이용한 기상정보의 기업 의사결정에 미치는 영향 평가

  • Lee, Ki-Kwang (Institute of Industrial Management Research/School of management, Inje University) ;
  • Lee, Joong-Woo (Institute of Industrial Management Research/School of management, Inje University)
  • 이기광 (인제대학교 산업경영연구원/경영학부) ;
  • 이중우 (인제대학교 산업경영연구원/경영학부)
  • Published : 2007.06.30
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Abstract

In this paper the economic value of weather forecasts is valuated for profit-oriented enterprise decision-making situations. Value is estimated in terms of monetary profits (or benefits) resulted from the forecast user's decision under the specific payoff structure, which is represented by a profit/loss ratio model combined with a decision function and a value score (VS). The forecast user determines a business-related decision based on the probabilistic forecast, the user's subjective reliability of the forecasts, and the payoff structure specific to the user's business environment. The VS curve for a meteorological forecast is specified by a function of the various profit/loss ratios, providing the scaled economic value relative to the value of a perfect forecast. The proposed valuation method based on the profit/loss ratio model and the VS is adapted for hypothetical sets of forecasts and verified for site-specific probability of precipitation forecast of 12 hour and 24 hour-lead time, which is generated from Korea meteorological administration (KMA). The application results show that forecast information with shorter lead time can provide the decision-makers with great benefits and there are ranges of profit/loss ratios in which high subjective reliability of the given forecast is preferred.

Keywords

References

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