Abstract
In this study, we consider two classes of multicriteria two-stage stochastic programs in finite probability spaces with multivariate risk constraints. The first-stage problem features multivariate stochastic benchmarking constraints based on a vector-valued random variable representing multiple and possibly conflicting stochastic performance measures associated with the second-stage decisions. In particular, the aim is to ensure that the decision-based random outcome vector of interest is preferable to a specified benchmark with respect to the multivariate polyhedral conditional value-at-risk or a multivariate stochastic order relation. In this case, the classical decomposition methods cannot be used directly due to the complicating multivariate stochastic benchmarking constraints. We propose an exact unified decomposition framework for solving these two classes of optimization problems and show its finite convergence. We apply the proposed approach to a stochastic network design problem in the context of pre-disaster humanitarian logistics and conduct a computational study concerning the threat of hurricanes in the Southeastern part of the United States. The numerical results provide practical insights about our modeling approach and show that the proposed algorithm is computationally scalable.
Similar content being viewed by others
References
Federal Emergency Management Agency. https://egateway.fema.gov/ESF6/DRCLocator#. Accessed 08 Dec 2017
Ahmed, S.: Convexity and decomposition of mean-risk stochastic programs. Math. Progr. 106(3), 433–446 (2006)
Artzner, P., Delbaen, F., Eber, J., Heath, D.: Coherent measures of risk. Math. Financ. 9(3), 203–228 (1999)
Balcik, B., Beamon, B.: Facility location in humanitarian relief. Int. J. Logist. Res. Appl. 11(2), 101–121 (2008)
Bodur, M., Luedtke, J.R.: Mixed-integer rounding enhanced Benders decomposition for multiclass service-system staffing and scheduling with arrival rate uncertainty. Manag. Sci. 63(7), 2073–2091 (2017)
Bonnans, J.F., Shapiro, A.: Perturbation Analysis of Optimization Problems. Springer Series in Operations Research. Springer, New York (2000)
Çelik, M., Ergun, Ö., Johnson, B., Keskinocak, P., Lorca, Á., Pekgün, P., Swann, J.: Humanitarian logistics. In: New Directions in Informatics, Optimization, Logistics, and Production, pp. 18–49. INFORMS (2012)
Dentcheva, D., Martinez, G.: Two-stage stochastic optimization problems with stochastic ordering constraints on the recourse. Eur. J. Oper. Res. 219(1), 1–8 (2012)
Dentcheva, D., Ruszczyński, A.: Optimization with stochastic dominance constraints. SIAM J. Optim. 14(2), 548–566 (2003)
Dentcheva, D., Ruszczyński, A.: Optimization with multivariate stochastic dominance constraints. Math. Program. 117(1), 111–127 (2009)
Dentcheva, D., Wolfhagen, E.: Optimization with multivariate stochastic dominance constraints. SIAM J. Optim. 25(1), 564–588 (2015)
Dentcheva, D., Wolfhagen, E.: Two-stage optimization problems with multivariate stochastic order constraints. Math. Oper. Res. 41(1), 1–22 (2016)
Döyen, A., Aras, N., Barbarosoğlu, G.: A two-echelon stochastic facility location model for humanitarian relief logistics. Optim. Lett. 6(6), 1123–1145 (2012)
Dupǎcová, J.: Risk objectives in two-stage stochastic programming models. Kybernetika 44(2), 227–242 (2008)
Elçi, Ö., Noyan, N.: A chance-constrained two-stage stochastic programming model for humanitarian relief network design. Transp. Res. Part B: Methodol. 108, 55–83 (2018)
Fábián, C.I.: Handling CVaR objectives and constraints in two-stage stochastic models. Eur. J. Oper. Res. 191(3), 888–911 (2008)
Gollmer, R., Gotzes, U., Schultz, R.: A note on second-order stochastic dominance constraints induced by mixed-integer linear recourse. Math. Program. 216(1), 179–190 (2011)
Gutjahr, W.J., Nolz, P.C.: Multicriteria optimization in humanitarian aid. Eur. J. Oper. Res. 252(2), 351–366 (2016)
Homem-de-Mello, T., Mehrotra, S.: A cutting surface method for uncertain linear programs with linear stochastic dominance constraints. SIAM J. Optim. 20(3), 1250–1273 (2009)
Hong, X., Lejeune, M.A., Noyan, N.: Stochastic network design for disaster preparedness. IIE Trans. 47(4), 329–357 (2015)
Hu, J., Mehrotra, S.: Robust and stochastically weighted multiobjective optimization models and reformulations. Oper. Res. 60(4), 936–953 (2012)
Hu, J., Homem-de Mello, T., Mehrotra, S.: Sample average approximation of stochastic dominance constrained programs. Math. Program. 133(1–2), 171–201 (2012)
Huang, M., Smilowitz, K., Balcik, B.: Models for relief routing: equity, efficiency and efficacy. Transp. Res. Part E 48(1), 2–18 (2012)
Küçükyavuz, S., Noyan, N.: Cut generation for optimization problems with multivariate risk constraints. Math. Program. 159(1), 165–199 (2016)
Kusuoka, S.: On law invariant coherent risk measures. Adv. Math. Econ. 3, 83–95 (2001)
Liberatore, F., Pizarro, C., de Blas, C.S., Ortuño, M.: Uncertainty in humanitarian logistics for disaster management. A review. In: Vitoriano, B., Montero, J., Ruan, D. (eds.) Decision aid Models for Disaster Management and Emergencies, pp. 45–74. Springer, Berlin (2013)
Liu, X., Küçükyavuz, S., Noyan, N.: Robust multicriteria risk-averse stochastic programming models. Ann. Oper. Res. 259(1), 259–294 (2017)
Noyan, N.: Risk-averse two-stage stochastic programming with an application to disaster management. Comput. Oper. Res. 39(3), 541–559 (2012)
Noyan, N., Balcik, B., Atakan, S.: A stochastic optimization model for designing last mile relief networks. Transp. Sci. 50(3), 1092–1113 (2016)
Noyan, N., Rudolf, G.: Optimization with multivariate conditional value-at-risk-constraints. Oper. Res. 61(4), 990–1013 (2013)
Noyan, N., Rudolf, G.: Optimization with stochastic preferences based on a general class of scalarization functions. Oper. Res. 66(2), 463–486 (2018)
Rawls, C.G., Turnquist, M.A.: Pre-positioning of emergency supplies for disaster response. Transp. Res. Part B: Methodol. 44(4), 521–534 (2010)
Rawls, C.G., Turnquist, M.A.: Pre-positioning planning for emergency response with service quality constraints. OR Spectr. 33(3), 481–498 (2011)
Rockafellar, R., Uryasev, S.: Optimization of conditional value-at-risk. J. Risk 2(3), 21–41 (2000)
Ruszczyński, A., Shapiro, A. (eds.): Stochastic Programming, Handbooks in Operations Research and Management Science 10. Elsevier, Amsterdam (2003)
Saaty, T.L.: Decision Making for Leaders: The Analytic Hierarchy Process for Decisions in a Complex World. RWS Publications, Pittsburgh (1990)
Salmerón, J., Apte, A.: Stochastic optimization for natural disaster asset prepositioning. Prod. Oper. Manag. 19(5), 561–574 (2010)
Van Slyke, R., Wets, R.: L-shaped linear programs with applications to optimal control and stochastic programming. SIAM J. Appl. Math. 17(4), 638–663 (1969)
Vitoriano, B., Ortuño, M.T., Tirado, G., Montero, J.: A multi-criteria optimization model for humanitarian aid distribution. J. Glob. Optim. 51(2), 189–208 (2011)
Acknowledgements
We thank the guest editors and reviewers for their valuable comments that improved the paper. Nilay Noyan acknowledges the support from The Scientific and Technological Research Council of Turkey under Grant #115M560. Simge Küçükyavuz and Merve Meraklı are supported, in part, by National Science Foundation Grant 1907463.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Noyan, N., Meraklı, M. & Küçükyavuz, S. Two-stage stochastic programming under multivariate risk constraints with an application to humanitarian relief network design. Math. Program. 191, 7–45 (2022). https://doi.org/10.1007/s10107-019-01373-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10107-019-01373-4
Keywords
- Stochastic programming
- Multicriteria optimization
- Risk-averse two-stage
- Multivariate risk
- Conditional value-at-risk
- Stochastic dominance
- Benders decomposition
- Branch-and-cut
- Network design
- Pre-disaster
- Humanitarian relief