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The value of the stochastic solution in stochastic linear programs with fixed recourse

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Abstract

Stochastic linear programs have been rarely used in practical situations largely because of their complexity. In evaluating these problems without finding the exact solution, a common method has been to find bounds on the expected value of perfect information. In this paper, we consider a different method. We present bounds on the value of the stochastic solution, that is, the potential benefit from solving the stochastic program over solving a deterministic program in which expected values have replaced random parameters. These bounds are calculated by solving smaller programs related to the stochastic recourse problem.

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Authors and Affiliations

  1. Department of Industrial and Operations Engineering, The University of Michigan, 48109, Ann Arbor, MI, USA

    John R. Birge

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  1. John R. Birge
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Additional information

This paper is an extension of part of the author's dissertation in the Department of Operations Research, Stanford University, Stanford, California. The research was supported at Stanford by the Department of Energy under Contract DE-AC03-76SF00326, PA#DE-AT03-76ER72018, Office of Naval Research under Contract N00014-75-C-0267 and the National Science Foundation under Grants MCS76-81259, MCS-7926009 and ECS-8012974 (formerly ENG77-06761).

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Birge, J.R. The value of the stochastic solution in stochastic linear programs with fixed recourse. Mathematical Programming 24, 314–325 (1982). https://doi.org/10.1007/BF01585113

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  • DOI: https://doi.org/10.1007/BF01585113

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