Convergence analysis for distributional robust optimization and equilibrium problems

Sun, Hailin and Xu, Huifu (2016) Convergence analysis for distributional robust optimization and equilibrium problems. Mathematics of Operations Research, 41 (2), 377-401. (doi:10.1287/moor.2015.0732).

Record type: Article

Abstract

In this paper, we study distributionally robust optimization approaches for a one-stage stochastic minimization problem, where the true distribution of the underlying random variables is unknown but it is possible to construct a set of probability distributions, which contains the true distribution and optimal decision is taken on the basis of the worst-possible distribution from that set. We consider the case when the distributional set (which is also known as the ambiguity set) varies and its impact on the optimal value and the optimal solutions. A typical example is when the ambiguity set is constructed through samples and we need to look into the impact of increasing the sample size. The analysis provides a unified framework for convergence of some problems where the ambiguity set is approximated in a process with increasing information on uncertainty and extends the classical convergence analysis in stochastic programming. The discussion is extended briefly to a stochastic Nash equilibrium problem where each player takes a robust action on the basis of the worst subjective expected objective values.

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