Proposes residuals-based contextual DRO with decision-dependent uncertainty using regression, provides statistical guarantees, and develops a convergent Benders decomposition algorithm.
Residuals-Based Contextual Distributionally Robust Optimization with Decision-Dependent Uncertainty: Theoretical Guarantees and Decomposition Algorithm
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abstract
We consider a residuals-based distributionally robust optimization (DRO) model, where the underlying uncertainty depends on both covariate information and our decisions. We adopt both parametric and nonparametric regression models to learn the latent decision dependency and construct a nominal distribution (thereby ambiguity sets) around the learned model using empirical residuals from the regressions. We formulate the ambiguity set via the Wasserstein distance, where the nominal distribution is both decision- and covariate-dependent. We provide conditions under which desired statistical properties such as asymptotic optimality, rate of convergence, and finite sample guarantees are satisfied. To solve the resulting DRO model, we develop a specialized Bender's decomposition algorithm with nonlinear cuts and prove its finite convergence. Through numerical experiments, we illustrate the effectiveness of our approach and the benefits of integrating decision dependency into a residuals-based DRO framework.
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math.OC 1years
2024 1verdicts
UNVERDICTED 1representative citing papers
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Residuals-Based Contextual Distributionally Robust Optimization with Decision-Dependent Uncertainty: Theoretical Guarantees and Decomposition Algorithm
Proposes residuals-based contextual DRO with decision-dependent uncertainty using regression, provides statistical guarantees, and develops a convergent Benders decomposition algorithm.