A Project Portfolio Selection Model Considering Mental Accounts and Uncertain Synergies

Tizhuang Zhang; Qiming Liu

Authors

Tizhuang Zhang East China Development Branch, State Grid Xin Yuan Co., Ltd., Hangzhou 310052, China Author https://orcid.org/0009-0008-8740-5364
Qiming Liu East China Development Branch, State Grid Xin Yuan Co., Ltd., Hangzhou 310052, China Author https://orcid.org/0009-0004-7216-7229

Keywords:

Portfolio selection, Mental accounting theory, Uncertainty theory, Genetic algorithm

Abstract

Project portfolio selection serves as a critical step for enterprise strategy. However, the psychological behaviors of decision-makers and uncertain synergies hinder project portfolio selection. Besides, few studies explore how to select projects considering the impact of these two factors. To address these gaps, mental accounting theory and uncertainty theory are applied in this study to build a project portfolio selection model. First, the paper describes a pyramidal structure of portfolio selection for decision-makers based on mental accounts to conduct project selection. Second, based on the above structure, a project portfolio selection model considering uncertain synergies is constructed. Finally, an improved genetic algorithm is used to solve the model. An illustrative example is used to validate the proposed model. The analysis results show that: 1) the proposed model is closer to the actual decision-making environment; 2) the proposed model can improve the efficient use of resources; and 3) the proposed model can provide a smaller decision-making basis in an uncertain environment.

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