Mining Optimal Policies: A Pattern Recognition Approach to Model Analysis
44 Pages Posted: 27 Nov 2017 Last revised: 22 Aug 2018
Date Written: August 19, 2018
This paper studies the application of Machine Learning (ML) for discovering structural properties of optimal policies in numerically obtained solutions to optimization problems. We propose a framework based on ML for conducting model analysis in a systematic way, which complements theoretical and numerical methods. As a proof of concept, we apply the framework to core operations problems, such as inventory management, queuing admission control, multi-armed bandit (MAB), and revenue management problems. We demonstrate how this approach can be used to identify optimal threshold-based policies (inventory management and admission control) and index policies (MAB), as well as for developing new heuristics for revenue management problems. For the MAB problem, our approach leads to a new efficient algorithm for computing optimal index policies. The main contribution of this work is methodological, in proposing and demonstrating the potential of using ML algorithms to analyzing optimization problems and devising interpretable policies.
Keywords: Mathematical modeling, Machine learning, Dynamic programming, Interpretability
JEL Classification: C44
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