Scenario Analysis and Multicriteria Decision Making

Abstract

The use of scenarios as internally consistent representations of possible futures is being widely used for strategic planning, in preference to attempting to forecast the future in detail. This has two implications for the application of MCDM to strategic planning problems in large corporations or in the public sector. Firstly, "policy scenarios" may be used as a representation of possible policy directions, but which are neither complete nor exhaustive. Here the challenges to MCDM relate to the selection of good scenarios, and to the provision of meaningful methods of comparisons between these scenarios. Secondly, future uncertainties will not be expressed as probability distributions, but rather as a small number of "state scenarios" (again neither exhaustive nor complete). We discuss reasons why such scenarios should be treated as part of the objectives’ hierarchy, rather than to try to collapse across them by taking expectations, for example. This, too, has implications for choice of MCDM procedures and for subsequent sensitivity studies.