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Uncertainty in Optimisation

  • Annika Kangas
  • Mikko Kurttila
  • Teppo Hujala
  • Kyle Eyvindson
  • Jyrki Kangas
Chapter
  • 878 Downloads
Part of the Managing Forest Ecosystems book series (MAFE, volume 30)

Abstract

Most of the applications dealing with linear programming use deterministic programming. Stochastic programming is, however, a more realistic way of formulating forest management planning problems, and it produces solutions that have a better expected value than the deterministic solutions. In this chapter, we present the linear and goal programming problems from the previous chapter using stochastic programming approach and deterministic equivalent problem formulation. We present approaches based on one stage and two stages. We describe the uncertainty using a scenario tree. We show how the value of stochastic solution and value of perfect information are calculated from the results. We also show how the computationally more easy chance-constrained and robust programming methods work in these cases. Finally, we present an approach of robust portfolio modelling for dealing with the uncertainty.

Keywords

Stochastic programming with simple recourse Two-stage programming with recourse Soft and hard constraints Scenario tree Value of information Value of stochastic solution Downside risk 

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Copyright information

© Springer International Publishing Switzerland 2015

Authors and Affiliations

  • Annika Kangas
    • 1
  • Mikko Kurttila
    • 2
  • Teppo Hujala
    • 3
  • Kyle Eyvindson
    • 4
  • Jyrki Kangas
    • 5
  1. 1.Economics and SocietyNatural Resources Institute Finland (Luke)JoensuuFinland
  2. 2.Bio-based Business and IndustryNatural Resources Institute Finland (Luke)JoensuuFinland
  3. 3.Bio-based Business and IndustryNatural Resources Institute Finland (Luke)HelsinkiFinland
  4. 4.Department of Forest SciencesUniversity of HelsinkiHelsinkiFinland
  5. 5.School of Forest SciencesUniversity of Eastern FinlandJoensuuFinland

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