Two-stage stochastic optimization problems with stochastic ordering constraints on the recourse

Darinka Dentcheva and Gabriela Martinez

European Journal of Operational Research, 2012, vol. 219, issue 1, 1-8

Abstract: We consider two-stage risk-averse stochastic optimization problems with a stochastic ordering constraint on the recourse function. Two new characterizations of the increasing convex order relation are provided. They are based on conditional expectations and on integrated quantile functions: a counterpart of the Lorenz function. We propose two decomposition methods to solve the problems and prove their convergence. Our methods exploit the decomposition structure of the risk-neutral two-stage problems and construct successive approximations of the stochastic ordering constraints. Numerical results confirm the efficiency of the methods.

Keywords: Increasing convex order; Stochastic dominance; Decomposition methods; Lorenz curve; Survival function; Stochastic programming (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:219:y:2012:i:1:p:1-8

DOI: 10.1016/j.ejor.2011.11.044

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