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Optimal Budget Allocation for Sample Average Approximation

Author

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  • Johannes O. Royset

    (Operations Research Department, Naval Postgraduate School, Monterey, California 93943)

  • Roberto Szechtman

    (Operations Research Department, Naval Postgraduate School, Monterey, California 93943)

Abstract

The sample average approximation approach to solving stochastic programs induces a sampling error, caused by replacing an expectation by a sample average, as well as an optimization error due to approximating the solution of the resulting sample average problem. We obtain estimators of an optimal solution and the optimal value of the original stochastic program after executing a finite number of iterations of an optimization algorithm applied to the sample average problem. We examine the convergence rate of the estimators as the computing budget tends to infinity, and we characterize the allocation policies that maximize the convergence rate in the case of sublinear, linear, and superlinear convergence regimes for the optimization algorithm.

Suggested Citation

  • Johannes O. Royset & Roberto Szechtman, 2013. "Optimal Budget Allocation for Sample Average Approximation," Operations Research, INFORMS, vol. 61(3), pages 762-776, June.
    • Handle: RePEc:inm:oropre:v:61:y:2013:i:3:p:762-776
    DOI: 10.1287/opre.2013.1163
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    References listed on IDEAS

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    Citations

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    Cited by:

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    3. Bismark Singh & David P. Morton & Surya Santoso, 2018. "An adaptive model with joint chance constraints for a hybrid wind-conventional generator system," Computational Management Science, Springer, vol. 15(3), pages 563-582, October.
    4. Johannes O. Royset & Roger J-B Wets, 2016. "Optimality Functions and Lopsided Convergence," Journal of Optimization Theory and Applications, Springer, vol. 169(3), pages 965-983, June.
    5. Suvrajeet Sen & Yifan Liu, 2016. "Mitigating Uncertainty via Compromise Decisions in Two-Stage Stochastic Linear Programming: Variance Reduction," Operations Research, INFORMS, vol. 64(6), pages 1422-1437, December.
    6. Jamie Fairbrother & Amanda Turner & Stein W. Wallace, 2018. "Scenario Generation for Single-Period Portfolio Selection Problems with Tail Risk Measures: Coping with High Dimensions and Integer Variables," INFORMS Journal on Computing, INFORMS, vol. 30(3), pages 472-491, August.
    7. Kyle Cooper & Susan R. Hunter & Kalyani Nagaraj, 2020. "Biobjective Simulation Optimization on Integer Lattices Using the Epsilon-Constraint Method in a Retrospective Approximation Framework," INFORMS Journal on Computing, INFORMS, vol. 32(4), pages 1080-1100, October.

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