CORRELATIONS IN STOCHASTIC PROGRAMMING: A CASE FROM STOCHASTIC SERVICE NETWORK DESIGN

Arnt-Gunnar Lium (), Teodor Gabriel Crainic () and Stein Wallace
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Arnt-Gunnar Lium: P.O. Box 2110 NO-6402 Molde, Norway
Teodor Gabriel Crainic: Centre de recherche sur les transports, Université de Montréal, C.P. 6128, succ. Centre-ville, Montréal QC, Canada H3C 3J7, Canada

Asia-Pacific Journal of Operational Research (APJOR), 2007, vol. 24, issue 02, 161-179

Abstract: Deterministic models, even if used repeatedly, will not capture the essence of planning in an uncertain world. Flexibility and robustness can only be properly valued in models that use stochastics explicitly, such as stochastic optimization models. However, it may also be very important to capture how the random phenomena arerelatedto one another. In this article we show how the solution to a stochastic service network design model depends heavily on the correlation structure among the random demands. The major goal of this paper is to discusswhythis happens, and to provide insights into the effects of correlations on solution structures. We illustrate by an example.

Keywords: Stochastic programming; service network design; correlations; flexibility; robustness; solution structure (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (11)

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DOI: 10.1142/S0217595907001206

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