Technical note: Sochastic optimization with decisions truncated by positively dependent random variables. (English) Zbl 1455.90112
Summary: We study stochastic optimization problems with decisions truncated by random variables. This paper extends existing results in the literature by allowing positively dependent random variables and a two-part fee structure. We develop a transformation technique to convert the original nonconvex problems to equivalent convex ones. We apply our transformation technique to an inventory substitution model with random supply capacities and a two-part fee cost structure. In addition, we extend our results to incorporate the decision maker’s risk attitude.
The online appendix is available at https://doi.org/10.1287/opre.2018.1815.
The online appendix is available at https://doi.org/10.1287/opre.2018.1815.
Keywords:
stochastic optimization; dependent supply capacity uncertainty; two-part fee structure; inventory management; risk aversionSoftware:
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