TY - JOUR

T1 - Correlations in stochastic programming

T2 - a case from stochastic service network design

AU - Lium, Arnt-Gunnar

AU - Crainic, Teodor Gabriel

AU - Wallace, Stein W

PY - 2007/4

Y1 - 2007/4

N2 - Deterministic models, even if used repeatedly, will not capture the essence of planning in an uncertain world. Flexibility and robustness can only be properly valued in models that use stochastics explicitly, such as stochastic optimization models. However, it may also be very important to capture how the random phenomena are related to one another. In this article we show how the solution to a stochastic service network design model depends heavily on the correlation structure among the random demands. The major goal of this paper is to discuss why this happens, and to provide insights into the effects of correlations on solution structures. We illustrate by an example.

AB - Deterministic models, even if used repeatedly, will not capture the essence of planning in an uncertain world. Flexibility and robustness can only be properly valued in models that use stochastics explicitly, such as stochastic optimization models. However, it may also be very important to capture how the random phenomena are related to one another. In this article we show how the solution to a stochastic service network design model depends heavily on the correlation structure among the random demands. The major goal of this paper is to discuss why this happens, and to provide insights into the effects of correlations on solution structures. We illustrate by an example.

KW - Stochastic programming

KW - service network design

KW - correlations

KW - flexibility

KW - robustness

KW - solution structure

U2 - 10.1142/S0217595907001206

DO - 10.1142/S0217595907001206

M3 - Journal article

VL - 24

SP - 161

EP - 179

JO - Asia-Pacific Journal of Operational Research

JF - Asia-Pacific Journal of Operational Research

SN - 0217-5959

IS - 2

ER -