Title | Decision-dependent probabilities in stochastic programs with recourse |

Publication Type | Journal Article |

Year of Publication | 2018 |

Authors | Hellemo L, Barton PI, Tomasgard A |

Journal | Computational Management Science |

Volume | 15 |

Issue | 3-4 |

Pagination | 369–395 |

Abstract | Stochastic programming with recourse usually assumes uncertainty to be exogenous. Our work presents modelling and application of decision-dependent uncertainty in mathematical programming including a taxonomy of stochastic programming recourse models with decision-dependent uncertainty. The work includes several ways of incorporating direct or indirect manipulation of underlying probability distributions through decision variables in two-stage stochastic programming problems. Two-stage models are formulated where prior probabilities are distorted through an affine transformation or combined using a convex combination of several probability distributions. Additionally, we present models where the parameters of the probability distribution are first-stage decision variables. The probability distributions are either incorporated in the model using the exact expression or by using a rational approximation. Test instances for each formulation are solved with a commercial solver, BARON, using selective branching. |

URL | https://link.springer.com/article/10.1007/s10287-018-0330-0 |

DOI | 10.1007/s10287-018-0330-0 |

# Decision-dependent probabilities in stochastic programs with recourse

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