MANAGEMENT SUPPORT BY KNOWLEDGE USING THE CONCEPT OF UTILITY OF SUSTAINABLE DEVELOPMENT

摘要

The paper deals with management support employing the two-factors utility function. The first factor represents the expected return on invested capital while the second factor expresses the risk of the worse case (crises) survival. Such a utility function, being consistent with the behavioral prospect theory, is called utility of sustainable development. Using that concept it is possible to support the management activities which involve market and operational risks. It is also possible to derive the optimum strategies for the budget allocation among different projects or contracts. The methodology presented enables us also to derive a fair allocation of duties and benefits among the cooperating partners in organizations and find the best strategies of loss prevention or elimination (by insurance).