Some experiments on solving multistage stochastic mixed 0-1 programs with time stochastic dominance constraints

Laureano F. Escudero Bueno, María Araceli Garín Martín, María Merino Maestre and Gloria Pérez Sainz de Rozas

No 1134-8984, BILTOKI from Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística)

Abstract: In this work we extend to the multistage case two recent risk averse measures for two-stage stochastic programs based on first- and second-order stochastic dominance constraints induced by mixed-integer linear recourse. Additionally, we consider Time Stochastic Dominance (TSD) along a given horizon. Given the dimensions of medium-sized problems augmented by the new variables and constraints required by those risk measures, it is unrealistic to solve the problem up to optimality by plain use of MIP solvers in a reasonable computing time, at least. Instead of it, decomposition algorithms of some type should be used. We present an extension of our Branch-and-Fix Coordination algorithm, so named BFC-TSD, where a special treatment is given to cross scenario group constraints that link variables from different scenario groups. A broad computational experience is presented by comparing the risk neutral approach and the tested risk averse strategies. The performance of the new version of the BFC algorithm versus the plain use of a state-of-the-artMIP solver is also reported.

Keywords: multistage stochastic mixed 0-1 optimization; scenario clustering; risk averse measures; stochastic dominance constraints (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cmp
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Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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