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Stochastic Dominance for Project Screening and Selection Under Uncertainty by Adekunle M

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Stochastic Dominance for Project Screening and Selection Under Uncertainty by Adekunle M Stochastic Dominance for Project Screening and Selection under Uncertainty by Adekunle M. Adeyemo B.Sc., Chemical Engineering, University of Lagos (2006) S.M., Chemical Engineering Practice, MIT (2012) Submitted to the Department of Chemical Engineering in partial fulfillment of the requirements for the degree of Doctor of Philosophy at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY February 2013 c Massachusetts Institute of Technology 2013. All rights reserved. Author.............................................................. Department of Chemical Engineering February 27 2013 Certified by.......................................................... Gregory J. McRae Hoyt C. Hottel Professor of Chemical Engineering (Emeritus) Thesis Supervisor Accepted by......................................................... Patrick S. Doyle Chairman, Department Committee on Graduate Theses 2 Stochastic Dominance for Project Screening and Selection under Uncertainty by Adekunle M. Adeyemo Submitted to the Department of Chemical Engineering on February 27 2013, in partial fulfillment of the requirements for the degree of Doctor of Philosophy Abstract At any given moment, engineering and chemical companies have a host of projects that they are either trying to screen to advance to the next stage of research or select from for implementation. These choices could range from a relative few, like the expansion of production capacity of a particular plant, to a large number, such as the screening for candidate compounds for the active pharmaceutical ingredient in a drug development program. This choice problem is very often further complicated by the presence of uncertainty in the project outcomes and introduces an element of risk into the screening or decision process. It is the task of the process designer to prune the set of available options, or in some cases, generate a set of possible choices, in the presence of such uncertainties to provide recommendations that are in line with the objectives of the ultimate decision maker. Screening and decision rules already exist that do this but the problem with most of them is that they add more assumptions to the structure of the preferences of the decision maker, or to the form of the uncertain distribution that characterizes the project outcome, than is known at the time. These challenges may lead to the screening out of viable alternatives and may ultimately lead to the selection of inferior projects. This thesis aims to demonstrate the applicability of Stochastic Dominance as method that can overcome these obstacles. Stochastic Dominance has been shown to be a general method for incorporating risk preferences into the decision-making process. It is consistent with classical decision theory, it makes minimal assumptions of the structure of the utility functions of the decision makers and of the nature of the distributions of the uncertainty and under certain conditions can be shown to be equivalent to the other objectives. In this work, an up-to-date review and an implementation framework for Stochas- tic Dominance is presented. The performance of the method relative to some of the other screening and decision objectives is examined in the light of three case studies: the design of a reactor-separator system for the production of a chemical, the selec- tion of a crop for biomass production and the design of a biomass to liquids process. The limitations of the method are also discussed together with suggestions for how they can be overcome to make the method more e↵ective. 3 Thesis Supervisor: Gregory J. McRae Title: Hoyt C. Hottel Professor of Chemical Engineering (Emeritus) 4 Acknowledgments It is said that it takes a village to raise a child. I have found, in the past 5+ years, that it may take a bit more to produce a PhD. A lot of people have, over the past five-and-a-half years, been essential to the successful completion of my thesis and I’d like to take some time to express my sincere appreciation for their investment in my life. First I’d like to thank my adviser, Gregory McRae, for teaching me how to think like a scientist and a problem solver. I appreciate the patience he showed me during the learning process and I’m grateful for all the wisdom and insights on life I got in our numerous non-research conversations. I thank my committee members, Richard de Neufville and Charles Cooney, for always having time on their calendar for me and for the insightful questions and feedback they had on the direction of the work. This work is so much better because of their input. I’d like to thank my family for the support and love they showed me throughout the process. Mummy, Oyin and Yinka - thank you for constantly reminding me that Iamlovedandcherished,regardlessoftheoutcomeofresearch(andlife,forthat matter) and for believing in me especially in the times when circumstances caused me to really doubt myself. Thank you for the phone calls, the emails and text messages, and for being quick to forgive my failure to respond on time. Of the many friends I made at MIT, four stand out above the rest for the sheer depth and contribution they made to my life in graduate school - Debo Ogunniyi, Po-Ru Loh, Sam Perli and Stephanie Lam. Thank you so much for sharing your lives with me and for showing me what loving and serving another person looks like. To the Ogunniyi family - thank you for welcoming me into their home and their lives. I can now say I have family here in the US and I thank you for being that family to me. The MIT Graduate Christian Fellowship, the Sidney-Pacific bible study group and Cambridgeport Baptist Church together formed my faith home for the past five and-a-half years and I am grateful for the many friends I made who kept me focused on the more important things in life, especially during frustrating periods of research. I enjoyed the Friday night talks, the Toscanini’s visits, Sunday Brunch, the long talks into the night, the dinners and lunches, retreats at Toah Nipi, the planning of events and, most of all, the warmth, joy and the beauty of a place of belonging in a group of people with whom I shared not just an academic experience, but a faith as well. Many of the conversations we had were played a big role in my growth and transformation and I appreciate everyone who was a part of these groups. ImadegoodfriendsamongthemyChemEcohort-the2007enteringclass-and Iappreciatedthetimeswespenttogether,bothintheearlyyearswhenwewere navigating the quals, practice school and adviser selection and in the later years of surviving the mid-PhD slump. I want to especially thank Jaisree Iyer, Emily Chang, Woo Keung and Pedro Valencia for their companionship throughout the time. In addition to the cohort, I also appreciate Tatyana Shatova, Jonathon Harding and Matt Stuber for being great co-TAs in 10.302 and 10.551 and for making the experience a 5 fun one. Iamthelastofahostofgraduatestudentsprivilegedtohavebeenapartofthe McRae Group and I want to thank the few of them that I was fortunate to share the experience with - Ken Hu, Bo Gong, Arman Haidari, Anusha Kothandaraman, Ingrid Berkelmans, Carolyn Seto, Mihai Anton, Alex Lewis, Dr. Duan and Chuang- Chung Lee. Thank you for the fun days, group meetings, good conversations and the camaraderie that arose from sharing the basement of 66 - especially during the floods! -allofwhichformedacorepartofmygraduateresearchexperience.Ithankour assistant, Joan Chisholm, for her care and attention, most especially when I became the sole member of the group. Joan, I wish you all the best in your retirement. Richard Braatz and his group occupied the lab shortly after my adviser retired and he was kind enough to let me keep my cubicle for as long as I remained a graduate student. Beyond that, I appreciate his including me in many of the activities of the group - outings, seminars and group meetings. The rest of the Braatz group - Xiaoxiang Zhou, Lifang Zhu, Mo Jiang, Ashley Ford-Versypt, Joe Scott, Kwang-ki Kim, Ali Mesbah, Jouha Min, Mark Molaro and Lucas Foguth - became my daily companions and friends and I also thank them for filling the void that the graduation of the rest of my previous group made, and, more than that, adding a colour of their own to my experience. The congenial nature of the department, is, in my opinion, largely unrivalled at MIT and it owes a lot to the sta↵, present and past, many of whom became friends. Suzanne Maguire, Joel Dashnaw, Fran Miles, Katie Lewis, Iris Chen, Mary Wesolowski, Christine Preston, Alina Haverty, Alison Martin, Jean Belbin, Jim Hard- sog, Melanie Miller, Rebecca Hailu, Rosangela Santos, Gwen Wilcox, Barbara Balk- will and Beth Tuths - thank you all so much for the dedication to the department that you display daily, and for making time for random graduate students with constant requests (I won’t mention any names). IwasaprogramassistantfortheMITSummerResearchProgramme(MSRP)for two summers and I got to meet and know an amazing group of people in the Office of the Dean of Graduate Education. I want to especially thank the coordinators of the programme, Christopher Jones and Monica Orta, both of whom became good friends and were always willing to provide a listening ear and/or give an encouraging hug and in general, be resources and wellsprings of care and support in school. I spent all but the last 4 weeks of the programme living in Ashdown House, the oldest (and newest) graduate dorm at MIT. My housemasters, Ann and Terry Orlando, as well as the house manager, Denise Lanfranchi, were more than I could have asked for. My roommates, Sam and Wilt, made coming back to the apartment evening feel like coming home (and not just to a place to sleep) and our ‘other roommates’ Jen and Albert, also contributed to the atmosphere we enjoyed. Graduate education is not cheap and a number of sources provided the funding that made it possible.
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