Adjustable Robust Parameter Design with Unknown Distributions
CentER Discussion Paper Series No. 2013-022
30 Pages Posted: 26 Mar 2013
Date Written: March 26, 2013
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
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