Encyclopedia of Operations Research and Management Science

2001 Edition
| Editors: Saul I. Gass, Carl M. Harris

Stochastic programming

Reference work entry
DOI: https://doi.org/10.1007/1-4020-0611-X_1005


Stochastic programming (SP) deals with a class of optimization models and algorithms in which some of the data may be subject to significant uncertainty. Such models are appropriate when data evolve over time and decisions need to be made prior to observing the entire data stream. For instance, investment decisions in portfolio planning problems must be implemented before stock performance can be observed. Similarly, utilities must plan power generation before the demand for electricity is realized. Such inherent uncertainty is amplified by technological innovation and market forces.

As a special example, consider the electric power industry. Deregulation of the electric power market and the possibility of personal electricity generators (e.g. gas turbines) are some of the causes of uncertainty in the industry. Under these circumstances it pays to develop models in which plans are evaluated against a variety of future scenarios that represent alternative outcomes of data....

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© Kluwer Academic Publishers 2001

Authors and Affiliations

  1. 1.University of ArizonaTucsonUSA