Utility-Directed Budget Allocation: An Application to a Central Planning Agency (Paperback)

This dissertation addresses the problem of distributing a fixed budget to multiple departments of an organization according to the budget requests they submit for their different projects. The funds allocated to the projects of a department form a vector and the ultimate interest of the decision maker centers on the vectors of funds allocated to the departments. The decision model in this study uses tradeoffs at three levels: between the criteria of a project, between the projects of a department and between the departments. The theoretical model uses utility theory to define these tradeoffs. The total utility of a department is its aggregate utility of its projects and the total utility of the central decision maker is the aggregate of the department utilities. The overall utility function is optimized with a linear/nonlinear programming model subject to a fixed budget. The model is flexible to incorporate some changes and simplifications. In the application, direct rating method is suggested to find the utility function values and the tradeoffs between the attributes. This model was successfully tested at a national scientific research council; it was adapted to their needs and incorporated into their existing model.