Monotone Approximation of Decision Problems

Naveed Chehrazi () and Thomas Weber
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Naveed Chehrazi: Department of Management Science and Engineering, Stanford University, Stanford, California 94305

Operations Research, 2010, vol. 58, issue 4-part-2, 1158-1177

Abstract: Many decision problems exhibit structural properties in the sense that the objective function is a composition of different component functions that can be identified using empirical data. We consider the approximation of such objective functions, subject to general monotonicity constraints on the component functions. Using a constrained B-spline approximation, we provide a data-driven robust optimization method for environments that can be sample-sparse. The method, which simultaneously identifies and solves the decision problem, is illustrated for the problem of optimal debt settlement in the credit-card industry.

Keywords: B-splines; monotone approximation; nonparametric/semiparametric methods; robust optimization; sample-sparse environments (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (8)

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