Abstract
We study stochastic optimization problems with decisions truncated by random variables. This paper extends existing results in the literature by allowing positively dependent random variables and a two-part fee structure. We develop a transformation technique to convert the original nonconvex problems to equivalent convex ones. We apply our transformation technique to an inventory substitution model with random supply capacities and a two-part fee cost structure. In addition, we extend our results to incorporate the decision maker's risk attitude.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1321-1327 |
| Number of pages | 7 |
| Journal | Operations Research |
| Volume | 67 |
| Issue number | 5 |
| DOIs | |
| State | Published - Jan 1 2019 |
Keywords
- Dependent supply capacity uncertainty
- Inventory management
- Risk aversion
- Stochastic optimization
- Two-part fee structure
ASJC Scopus subject areas
- Computer Science Applications
- Management Science and Operations Research