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Discrete Dynamics in Nature and Society
Volume 2014 (2014), Article ID 527598, 7 pages
http://dx.doi.org/10.1155/2014/527598
Research Article

Research on Overconfidence in Decision-Making for the Capacity Recovery of Damaged Power Systems

1Department of Business Administration, Zhejiang Institute of Administration, 1000 Wenyixilu, Hangzhou 311121, China
2Zhejiang Scientific Development Research Center, 1000 Wenyixilu, Hangzhou 311121, China

Received 12 March 2014; Accepted 10 April 2014; Published 8 May 2014

Academic Editor: Weihua Liu

Copyright © 2014 Xing Bao. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper studies the influence of two types of overconfident behavior, overestimation and overprecision, on decision of capacity recovery when power system’s critical capacity is seriously damaged. A newsvendor model is used to prove that increasing regulatory punishment for electricity shortage and providing subsidy for capacity recovery are conducive measures to calibrate insufficient service level caused by an overconfident manager. The research also finds that the manager’s overprecision behavior both negatively and positively influences the decision of capacity recovery, and a calibration method could motivate manager to recover more capacity by tuning up the ratio of punishment and subsidy. However, the effectiveness of the calibration mentioned above is inevitably weakened due to the less capacity recovery given by an overestimated manager. This research also indicates that the manager should pay close attention to the random disturbance whose distribution peak is left skewed, and correspondingly more capacity recovery should be given to improve the service level of power system during the disruption.