Comparing adaptive management and real options: slides and PDF

Adaptive management and real options approaches for sequential decisions making have undergone significant evolution over the last two decades. Both approaches are based on stochastic optimal control and Markov decision processes. They evolved independently from each other and their developments were motivated by different needs.

Adaptive management was specifically developed to handle decision problems with imperfect knowledge of the dynamics of the system, and is known as ‘learning by doing’. On the other hand, real options analysis was introduced specifically to value the flexibility to change actions over time in response to the evolution of uncertainty, and represents both optimal sequential decisions under uncertainty and a capital budgeting methodology. Because of these different purposes, different analytic and numerical methods were developed to solve these problems.

In our recent MODSIM paper (Chades et al, 2015), we review and compare the concepts, applications and recent advances in the numerical and analytic techniques in adaptive management and real options methodologies. A large body of knowledge accumulated in both fields makes a comprehensive review impractical in the context of this paper. Therefore, our review focuses on the most recent developments, with the purpose to identify potential areas of new developments that would address new challenges in the environmental decision area.

I. Chadès, T. Tarnopolskaya, S. Dunstall, J.Rhodes, and A.Tulloch (2015). A comparison of adaptive management and real options approaches for environmental decisions under uncertainty. In Weber, T., McPhee, M.J. and Anderssen, R.S. (eds) MODSIM2015, 21st International Congress on Modelling and Simulation. Modelling and Simulation Society of Australia and New Zealand, December 2015. ISBN: 978-0-9872143-5-5. (PDF)

Artificial Intelligence to the rescue of migratory shorebirds

Adaptive management or learning by doing, is praised as the best practice method to manage natural systems under uncertainty (see ESA’14 talk). Limited for a long time by our ability to solve adaptive management problems, our research now allows us to find the best adaptive management strategies when networks change over time. This was made possible thanks to our research in Artificial Intelligence (AI) and Conservation science.

What have we discovered in 2 steps?

1) Unlocking the beast. Being strategic about adaptive management means finding the best management strategy when we don’t know exactly what will happen in the future (structural uncertainty). Until very recently, finding the optimal strategy to such decision problems was possible for very small size problems, limiting the application of adaptive management principles. In 2012, we published a fundamental paper that demonstrates that adaptive management problems can be solved using a simplified POMDP (Partially Observable Markov Decision Process, see tiger paper). This is an important finding because modelling an adaptive management problem as a POMDP means we can use very fast algorithms from AI and solve very large adaptive management problems. On a side note, this paper was published at the top AI Conference (AAAI) and received “best paper award” (Computational Sustainability track, thanks for the support!).

2) Boldly go where no one has gone before. Our second step was to demonstrate the power of our findings on the most complex problem we could imagine. Thinking about it, the most difficult problems to solve in ecology are spatial problems (migratory networks) with changing dynamics over time (non stationarity, climate change) for which the consequences on species management are unknown (structural uncertainty, population dynamics). Well, we did it! Check our splendid paper in Proceedings B led by Sam Nicol that brings it all together. This work is amazing for so many good reasons: the shorebird application, the fundamental AI research, the writing, the figures, the authors, the journal and the 20-page supplementary information!

I hope you will enjoy it as much as we did.

Nicol, S., R.A. Fuller, T. Iwamura and I. Chadès (2015). Adapting environmental management to uncertain but inevitable change. Proceedings of the Royal Society B, 282(1808).

Sam also wrote a fantastic conversation article on the topic that explains the impact of our Proc B paper: We need to get smarter to save shorebirds from rising seas.


Adaptive management of migratory birds

We have a new paper published at IJCAI (top Artificial Intelligence conference, ranked A*, probably the most selective conference, congratulations to Sam and team!).

Nicol S, Buffet O, Iwamura T, Chadès I (2013). Adaptive management of migratory birds under sea level rise. Proceedings of IJCAI-13, Beijing, China. (PDF);

Or read the blog version on the computational sustainability website.

In this paper we are posing an adaptive management challenge to the AI community:

  • Why do we care? Because solving adaptive management problem is a complex optimisation problem and efficient methods are lacking!
  • What are we hoping? We hope that future AI research will account for the specific description of adaptive management problems using our problem as a classic benchmark problem.
  • How can you help, what’s next? If you have a complex problem feel free to submit a challenge to the AI community!


Sam at IJCAI 2013
Sam at IJCAI 2013 – Photo: O. Buffet

The conservation decisions team has a new team leader!

That is now official, I am the new team leader of the conservation decisions team and we will be hiring this year! So stay tuned if you are looking for a wicked postdoc position in adaptive management/computational sustainability!