the stochastic optimization problem

The Stochastic Optimization Problem

MS&E348Winter 2011/2012

Professor Gerd Infanger

The Stochastic linear program with recourse

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For convenience, define

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The stochastic optimization problem

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The stochastic optimization problem (cont.)

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The “wait and see” approach

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The “here and now” approach

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The “expected value” approach

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The “expected value” approach (cont.)

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Assessment of the different approaches

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Bounds on EVPI and VSS

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Solutions of the stochastic optimization problem

objective

EVPI VSS

Bound on either EVPI or VSS

Definitions

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Simple recourse

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