Assessing uncertainty in extreme events: Applications to risk-based decision making in interdependent infrastructure sectors

Risk-based decision making often relies upon expert probability assessments, particularly in the consequences of disruptive events and when such events are extreme or catastrophic in nature. Naturally, Such expert-elicited probability distributions can be fraught with errors, as they describe events which occur very infrequently and for which only sparse data exist. This paper presents a quantitative framework, the extreme event uncertainty sensitivity impact method (EE-USIM), for measuring the sensitivity of extreme event consequences to uncertainties in the parameters of the underlying probability distribution. The EE-USIM is demonstrated with the Inoperability input-output model (IIM), a model with which to evaluate the propagation of inoperability throughout an interdependent set of economic and infrastructure sectors. The EE-USIM also makes use of a two-sided power distribution function generated by expert elicitation of extreme event consequences. (C) 2008 Elsevier Ltd. All rights reserved.