Robust Explainable Prescriptive Analytics

34 Pages Posted: 11 May 2022

See all articles by Li Chen

Li Chen

National University of Singapore (NUS)

Melvyn Sim

National University of Singapore (NUS) - NUS Business School

Xun Zhang

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Minglong Zhou

Fudan University - School of Management

Date Written: May 11, 2022

Abstract

We propose a new robust explainable prescriptive analytics framework that minimizes a risk-based objective function under distributional ambiguity by leveraging on the data collected on the past realizations of the uncertain parameters affecting the decision model and the side information that have some predictive power on those uncertainties. The framework solves for an explainable response policy that transforms the side information directly to implementable here-and-now decisions. Such a policy should endow with the properties of facilitating explanation of the decisions, ensuring that the solutions are implementable, and maintaining the computational tractability of the optimization problem. We show that tree-based static and affine policies could achieve these salient properties. Although the historical data is available, the data-generating probability distribution remains unobservable. Hence, we adopt the data-driven robust satisficing framework to address the issue of overfitting when the empirical distribution is used for evaluating the risk-based objective function. We also suggest a localized robust satisficing model which, despite having weaker finite sample guarantees, is computationally attractive and can be applied to solving combinatorial optimization problems efficiently for a tree-based static policy. In tractable linear optimization models with recourse, we show in some restricted cases that the corresponding robust satisficing models can be solved using current tractable safe approximation techniques. We also introduce a new tractable safe approximation to address the general model when the constraints are biaffine in the outcome variables and the side information. We provide a simulation case study on how the framework can be applied to obtain an explainable policy for allocating taxis to different demand regions in response to the weather information.

Keywords: robust optimization, robust satisficing, robust analytics, predictive analytics, prescriptive analytics, side information

Suggested Citation

Chen, Li and Sim, Melvyn and Zhang, Xun and Zhou, Minglong, Robust Explainable Prescriptive Analytics (May 11, 2022). Available at SSRN: https://ssrn.com/abstract=4106222 or http://dx.doi.org/10.2139/ssrn.4106222

Li Chen

National University of Singapore (NUS) ( email )

Innovation 4.0, 3 Research Link, Singapore
Singapore, 117602
Singapore

HOME PAGE: http://chenli-ora.github.io/

Melvyn Sim

National University of Singapore (NUS) - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Xun Zhang

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

1954 Huashan Road
Shanghai, Shanghai 200030
China

Minglong Zhou (Contact Author)

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

HOME PAGE: http://https://sites.google.com/view/minglongzhou

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