Shape -- A Stochastic Hybrid Approximation Procedure for Two-Stage Stochastic Programs

Raymond K.-M. Cheung and Warren B. Powell
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Raymond K.-M. Cheung: Department of Industrial Engineering and Engineering Management, Hong Kong University of Science and Technology, Clearwater Bay, Hong Kong
Warren B. Powell: Department of Civil Engineering and Operations Research, Princeton University, Princeton, New Jersey 08544

Operations Research, 2000, vol. 48, issue 1, 73-79

Abstract: We consider the problem of approximating the expected recourse function for two-stage stochastic programs. Our problem is motivated by applications that have special structure, such as an underlying network that allows reasonable approximations to the expected recourse function to be developed. In this paper, we show how these approximations can be improved by combining them with sample gradient information from the true recourse function. For the case of strictly convex nonlinear approximations, we prove convergence for this hybrid approximation. The method is attractive for practical reasons because it retains the structure of the approximation.

Keywords: Programming; stochastic; Networks; stochastic (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (8)

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