Multi-objective optimization using statistical models

Mike Tsionas

European Journal of Operational Research, 2019, vol. 276, issue 1, 364-378

Abstract: In this paper we consider multi-objective optimization problems (MOOP) from the point of view of Bayesian analysis. MOOP problems can be considered equivalent to certain statistical models associated with the specific objectives and constraints. MOOP that can explore accurately the Pareto frontier are Generalized Data Envelopment Analysis and Goal Programming. In turn, posterior analysis of their associated statistical models can be implemented using Markov Chain Monte Carlo (MCMC) simulation. In addition, we consider the minimax regret problem which provides robust solutions and we develop similar MCMC posterior simulators without the need to define scenarios. The new techniques are shown to work well in four examples involving non-convex and disconnected Pareto problems and to a real world portfolio optimization problem where the purpose is to optimize simultaneously average return, mean absolute deviation, positive and negative skewness of portfolio returns. Globally minimum regret can also be implemented based on post-processing of MCMC draws.

Keywords: Decision analysis; Multi-objective optimization; Minimax regret; Bayesian analysis; Markov chain Monte Carlo (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:276:y:2019:i:1:p:364-378

DOI: 10.1016/j.ejor.2018.12.042

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