Predict-then-optimize or predict-and-optimize? An empirical evaluation of cost-sensitive learning strategies

Abstract

Predictive models are increasingly being used to optimize decision-making and minimize costs. A conventional approach is predict-then-optimize: first, a predictive model is built; then, this model is used to optimize decision-making. A drawback of this approach, however, is that it only incorporates costs in the second stage. Conversely, the predict-and-optimize approach proposes learning a predictive model by directly minimizing the cost of the downstream decision-making task. This is achieved by using a task-specific loss function incorporating the costs of different outcomes in the first stage, with the eventual aim of obtaining more cost-effective decisions in the second stage. This work compares both approaches in the context of cost-sensitive classification. Conceptually, we use the two-stage framework to categorize existing cost-sensitive learning methodologies by differentiating between methodologies for cost-sensitive model training and decision-making. Empirically, we compare and evaluate both approaches using different cost-sensitive training and decision-making methodologies, as well as both class-dependent and instance-dependent cost-sensitive methods. This is achieved using real-world data from a range of application areas and a combination of cost-sensitive and cost-insensitive performance measures. The key finding is that the decision-making strategy is generally found to be more effective than training with a task-specific loss or their combination.

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