EVALUATION OF THE ACCURACY OF NASLUNDS APPROXIMATION FOR MANAGERIAL DECISION-MAKING UNDER UNCERTAINTY

This paper uses Chance-Constrained Mathematical Programming (CCP) as a tool in project selection when the coefficients involved are independent normal random variables. The main contribution of the paper centers around showing how well chance-constrained programs can be solved using Naslund's approximation instead of other mathematical methods. If a given decision process involves a degree of uncertainty in its parameters and only binary decisions are required, then it is shown that approximation is the only available solution method.