Burk TechnoEconomics Blog

Using Monte Carlo Analysis in Technology Development: Quantifying risk due to uncertainty

“It is an inescapable fact that estimates of resource requirements for future systems are beset with uncertainty. The question is not whether uncertainty exists, but rather in determining the magnitude and nature of the uncertainty.” – Paul Dienemann, RAND Corporation Uncertainty in decision-making Cost models are built with layer upon layer of assumptions. We make assumptions about process parameters, equipment costs, and scaling factors. We make more assumptions about chemical prices, tax rates, and discount rates. We can usually estimate the uncertainty for each individual assumption intuitively, but understanding their combined effect is beyond us. Understanding the magnitude and nature

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