Behavioral perspective of power systems’ decision makers

Several power system problems require solutions in an uncertain environment. According to the relevant literature, expected utility theory (EUT) has been used extensively to solve such problems. However, the application of Prospect Theory (PT) has demonstrated that people deviate from the expected utility maximization because their effective behaviors reflect loss aversion and risk-seeking, reflection effects. The aim of this paper was to compare and critically analyze EUT and PT with the goal of outlining the different behaviors of a “real” decision maker (DM) and an “ideal” DM, with the real DM operating in the frame of PT and the ideal DM operating as EUT describes. The results of using the two different theories were compared by solving three power-system problems in uncertain scenarios.