GAME-THEORETIC APPROACHES TO NAVY BUDGET ALLOCATION
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Authors
Kline, Merril D., II
Subjects
game theory
Monte Carlo simulation
capital budgeting
risk analysis
decision analysis
stochastic optimization
Monte Carlo simulation
capital budgeting
risk analysis
decision analysis
stochastic optimization
Advisors
Lin, Kyle Y.
Mun, Johnathan C.
Date of Issue
2023-09
Date
Publisher
Monterey, CA; Naval Postgraduate School
Language
Abstract
Many agencies within the Navy are competing for a portion of the Navy budget to ensure their agency receives the maximum amount of funding possible. With a budget of $255.8 billion for FY24, it is imperative the Navy does everything in its power to make the most informed investment decisions. Consider a department that allocates funds to several subdivisions each fiscal year. We use mechanical design theory to create an investment decision–based game that motivates each subdivision to report their annual budget prediction truthfully. Specifically, the department penalizes subdivisions for inaccurate budget predictions by giving the subdivision a smaller budget next year, and offers a bonus for subdivisions that predict their budgets accurately. We use Monte Carlo simulation to demonstrate our approach with a set of assumptions on how each subdivision behaves. The output of these simulation experiments provides a confidence interval for the budget each subdivision receives. Finally, the department can run stochastic optimization to determine the final budget allocation to each of its subdivisions to maximize the department’s overall performance.
Type
Thesis
Description
Student Thesis (NPS NRP Project Related)
Series/Report No
Department
Organization
Identifiers
NPS Report Number
Sponsors
NPS Naval Research Program
This project was funded in part by the NPS Naval Research Program.
This project was funded in part by the NPS Naval Research Program.
Funder
This research is supported by funding from the Naval Postgraduate School, Naval Research Program (PE 0605853N/2098). https://nps.edu/nrp
Chief of Naval Operations (CNO)
Chief of Naval Operations (CNO)
Format
Citation
Distribution Statement
Approved for public release. Distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.