Expected Objective Value of a Stochastic Linear Program and the Degree of Uncertainty of Parameters

Hiroyuki Itami
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Hiroyuki Itami: Hiiotsubashi University, Japan

Management Science, 1974, vol. 21, issue 3, 291-301

Abstract: In this paper, we characterize the relationship between the expected optimal value of a stochastic linear program and a stochastic program with recourse and the degree of uncertainty in the objective function coefficients c and the stipulation vector b. It is shown that under certain conditions the expected objective value is nondecreasing as the degree of uncertainty in c increases and the opposite is true for the case of b. The degree of uncertainty of a random vector is defined in terms of a covariance matrix. Some managerial interpretations are also given.

Date: 1974
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:21:y:1974:i:3:p:291-301

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