Adjustable Robust Parameter Design with Unknown Distributions

CentER Discussion Paper Series No. 2013-022

30 Pages Posted: 26 Mar 2013

See all articles by Ihsan Yanikoglu

Ihsan Yanikoglu

Tilburg University - Department of Econometrics & Operations Research

Dick den Hertog

Tilburg University - Department of Econometrics & Operations Research

Jack P. C. Kleijnen

Tilburg University, CentER

Date Written: March 26, 2013

Abstract

This article presents a novel combination of robust optimization developed in mathematical programming, and robust parameter design developed in statistical quality control. Robust parameter design uses metamodels estimated from experiments with both controllable and environmental inputs (factors). These experiments may be performed with either real or simulated systems; we focus on simulation experiments. For the environmental inputs, classic robust parameter design assumes known means and covariances, and sometimes even a known distribution. We, however, develop a robust optimization approach that uses only experimental data, so it does not need these classic assumptions. Moreover, we develop 'adjustable' robust parameter design which adjusts the values of some or all of the controllable factors after observing the values of some or all of the environmental inputs. We also propose a new decision rule that is suitable for adjustable integer decision variables. We illustrate our novel method through several numerical examples, which demonstrate its effectiveness.

Keywords: robust optimization, simulation optimization, robust parameter design, phi-divergence

JEL Classification: C00, C15, C44, C61, C63, C67

Suggested Citation

Yanikoglu, Ihsan and den Hertog, Dick and Kleijnen, Jack P.C., Adjustable Robust Parameter Design with Unknown Distributions (March 26, 2013). CentER Discussion Paper Series No. 2013-022. Available at SSRN: https://ssrn.com/abstract=2239581 or http://dx.doi.org/10.2139/ssrn.2239581

Ihsan Yanikoglu (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

Dick Den Hertog

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

Jack P.C. Kleijnen

Tilburg University, CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4662029 (Phone)
+31 13 4663377 (Fax)

HOME PAGE: http://https://sites.google.com/site/kleijnenjackpc/

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