Chen 7march13

Victoria Chen
Center on Stochastic Modeling, Optimization, & Statistics

Statistical Roles in
Large-Scale
Stochastic Optimization
Victoria (Tory) Chen
Industrial & Manufacturing Systems Engineering

Victoria Chen
COSMOS

Develop computational methods that integrate ideas
from statistics, mathematical programming, and
stochastic modeling, and apply these methods for
decision-making in complex real-world systems.
Victoria Chen
Three Applications
Airline Fleet Assignment Model (FAM)
1264-dimensional two-stage stochastic program
Ellis Johnson, Jay Rosenberger, Barry Smith, Seoung Bum Kim.
Students: Venkata Pilla (2006), Thomas Shih (2006).
Ozone Pollution Control
524-dimensional stochastic dynamic program (SDP)
Michael Chang, Melanie Sattler, Seoung Bum Kim.
Students: Zehua Yang (2004), Neelesh Sule (2008), Bancha
Ariyajunya (2012), Diana Martinez.
Adaptive Interdisciplinary Pain Management
347 state variables
Robert Gatchel, Jay Rosenberger, Li Zeng.
Students: Chingfeng Lin (2010), Aera LeBoulluec.
Victoria Chen
Introduction to Fleet Assignment
The Fleet Assignment Model (FAM) allocates the
fleet of aircraft types to the scheduled flights in the
airline timetable.
Given an airline schedule the FAM problem is
subjected to the following operational constraints:
Cover constraints.
Balance constraints.
Plane count constraints.
Abara (1989)
Victoria Chen
Demand Driven Dispatch
Robust FAM approach reallocates aircraft, based
on Boeing concept of Demand Driven Dispatch
(D
3
).
Two aircraft are crew compatible, if they have the
same cockpit model.
Two stages in airline planning:
90 days (first stage): crew compatible families are
allocated.
Two weeks (second stage): specific aircraft are assigned.
Victoria Chen
Two-Stage FAM
A B
C
First stage
Leg 1: 757
Leg 2: 767
A B
C
Second stage
Leg 1: 767
Leg 2: 757
9:00 AM 12:00 PM
11:30 AM
9:00 AM
12:00 PM
11:30 AM
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Make First-Stage Decision (x)
Make Second-Stage Decision (y)
Random
Event ()
Occurs
Two-Stage Stochastic Programming (SP)
Victoria Chen
0
s.t.
)] , ( [ max
>
=
+
x
b Ax
x Q E x c
T
0
) ( ) ( ) ( s.t.
) ( max
) , ( where
>
= +
=
y
h y W x T
y q
x Q
T

Two-Stage SP Formulation
Victoria Chen
Birge and Louveaux (1997)
Traditional Benders Approach
Victoria Chen
Develop a metamodel of a systems computer model.
Use Design of Experiments to control sampling of inputs.
Use Statistical Modeling to build relationship between
computer output and input.
Utilize the metamodel to improve the system.
Design and Analysis of Computer
Experiments (DACE)
Sacks et al. (1989), Chen et al. (2006)
Victoria Chen
0
s.t.
)] , ( [ max
>
=
+
x
b Ax
x Q E x c
T
0
) ( ) ( ) ( s.t.
) ( max
) , ( where
>
= +
=
y
h y W x T
y q
x Q
T

Two-Stage SP Formulation
Victoria Chen
Pilla et al. (2008), Pilla et al. (2012)
DACE Based Two-Stage SP
Victoria Chen
CV = 0.05 DACE Benders'
Number of Scenarios 40 40
Number of MIP cuts 163 483
Time Required for MIP cuts 3.64 hours 3.26 days
Total Time 3.1 days 3.26 days
MIP objective $178,615,156.69 $178,377,994.42
Recourse Function Value $177,613,214.82 $177,459,628.86
Computational Comparison
Victoria Chen
Number of LP cuts 65 512
Time Required for LP cuts 85.6 sec 10.58 hours
LP Objective $178,652,847.88 $178,296,016.56
Cumulative Time Required
for MIP cuts 18.13 min 10.60 hours
Total Time 2.91 days 10.60 hours
MIP objective $178,555,380.65 $178,278,679.00
Victoria Chen
Number of LP cuts 95 1346
Time Required for LP cuts 99.6 sec 8.65 days
LP Objective $176,989,661.49 $176,943,047.80
Cumulative Time Required
for MIP cuts 3.07 min 8.68 days
Total Time 5.8 days 8.68 days
MIP objective $176,923,299.66 $176,851,699.50
Victoria Chen
Data Mining Variable Selection Phase
Shih et al. (2013)
Victoria Chen
Variable Selection
Method
#
Variables
%
Reduction
MARS
Test R
2
None 1061 0% 99.459%
Principal Components
Analysis 140 87% 99.013%
False Discovery Rate
w/ Trees 454 57% 99.230%
Reverse FDR 326 69% 99.053%
Correlated version
Reverse FDR 256 76% 99.052%
PCA Jolliffe (2002)
FDR-Benjamini and Hochberg (1995), Mitchell (1997)
Multivariate Adaptive Regression Splines (MARS)-Friedman (1991)
Data Mining Comparisons
Victoria Chen
O
3
= ozone
Naturally exists in the upper atmosphere (stratosphere),
where it shields the Earth from harmful ultraviolet rays.
At ground-level, ozone
is a harmful pollutant.
Irritates the human
respiratory system,
eyes, nose, throat.
Damages vegetation,
leading to reduced
crop yields.
Ground-Level Ozone Pollution
Victoria Chen
Controlling Ozone Pollution
Typical Approach
3D advanced photochemical simulation model.
Trial and error.
Across-the-board control strategies.
Targeted Decision-Making Approach
Explore the necessary emission reductions over time and
space to prevent an ozone exceedance.
Identify reductions in emissions that will lead to new
control strategies.
Provide information and guidance to government
decision makers for creating new control strategies.
Victoria Chen
Atlanta Atmospheric Chemistry Module
Victoria Chen
Ozone Pollution Targeted Optimization
Objective: Minimize cost to avoid ozone exceedance days.
Time Stages: Hours or groups of hours.
Locations: Grid regions or counties.
State x
t
at the beginning of Stage t: Ozone, NOx, VOCs at
different locations and at hours prior to stage t.
Decision u
t
in Stage t: Reductions of NOx, VOCs by location.
Constraint: Ozone exceedance limit adds penalty cost
Random Variables: Uncertainty in how Ozone, NOx change
over time and space.
Yang et al. (2007), Yang et al. (2009)
Victoria Chen
Ozone Pollution Targeted Optimization
State Transition:
E
1
= NOx emissions between 6 a.m. 9 a.m.

E
2
= NOx emissions between 9 a.m. 12 p.m.
Victoria Chen
Stochastic Dynamic Programming (SDP)
Objective:

Transition:
Constraints: T t
T t f
c E
t t
t t t t t
t t t
T
t
t
T
,..., 1 for ,
1 ,..., 1 for ), , , ( s.t.
) , , (
min
1
1
,...,
1
= e
= =

)
+
=
u
u x x
u x
u u
For stage t: x
t
is the vector of state variables
u
t
is the vector of decision variables
c
t
is the vector of random variables
c
t
(.) is the cost function
f
t
(.) is the multivariate transition function
I
t
is the set of constraints
Victoria Chen
For stages t through T:

Recursive formulation (Bellman 1957):

SDP solves backwards (t = T,, 1) to determine the future
value functions V
t
(x
t
) for all stages.
T t
T t f
c E V
T
t
t t
T t
,..., for ,
1 ,..., for ), , , ( s.t.
) , , (
min
) (
1
,...,
= e
= =
)
`
=
+
=
t
t
t t
t t t t t
t t t
t
t
u
u
u
u u
x x
x x
)} ( ) , , ( {
min
) (
1 1 + +
+ =
t t t t t t t t
V c E V
t
x u x x
u
SDP Future Value Function
Victoria Chen
Chen et al. (1999)
Cervellera et al. (2006)
Atlanta DMF: SDP Optimization
Victoria Chen
Atlanta Atmospheric Chemistry Module
Spatial Representation
Atlanta is NOx-limited focus on NOx emissions
Aggregate 4040 grid 55 grid for area sources
102 point sources
Maximum hourly-averaged ozone at 4 monitoring stations
(Conyers, S. Dekalb, Tucker, Yorkville)
Temporal Representation
Reduce 24 hours five 3-hour time periods
time period 0: from 4 a.m. to just before 7 a.m.
time period 1: from 7 a.m. to just before 10 a.m.
time period 2: from 10 a.m. to just before 1 p.m.
time period 3: from 1 p.m. to just before 4 p.m.
time period 4: from 4 p.m. to just before 7 p.m.
Victoria Chen
Monitored SDP State and Decision Variables
Original State Space for Stage t: For all time periods < t,
maximum ozone at the 4 Atlanta monitoring sites
total NOx emissions over the 25 grid regions and at the
102 point sources
Stage 1: 131 dimensions
Original Decision Space for Stage t: For time period t,
total NOx emissions over the 25 grid regions and at the
102 point sources
127 dimensions
Victoria Chen
SDP State Transition Model Development

Data from the 3D Advanced Photochemical Model
Study variables identified by data mining over time.
Experimental Design: 500-point Latin hypercube
Metamodel Fit: Regression models at each station for
maximum ozone in period p = 1, 2, 3, 4, as a function of
maximum ozone at the 4 stations in periods < p
total NOx emissions over each region / point in periods s p
Achieved regression R
2
> 0.90 for all except sites Tucker
and S. Dekalb in time period 2.
Victoria Chen
Monitored SDP State and Decision Variables
Key: Only those variables included in the metamodels need to
be maintained in the state and decision spaces.
Reduced State Space Stage 1: 17 dimensions
Reduced Decision Space Stage 1: 17 dimensions
SDP Dimensionality: The dimension of the SDP optimization
problem is the largest state space dimension 25
Victoria Chen
Chen et al. (1999)
Cervellera et al. (2006)
Victoria Chen
Objectives:
If all ozone goals can be attained, then find a policy that
attains the goals with the least emission reduction cost.
If ozone goals cannot be attained, then find the control policy
to minimize the ozone level.

Emission Reduction Cost vs. Penalty on Ozone
Penalty cost dominates emission reduction cost when ozone
threshold is violated.
Victoria Chen
0.075
0.08
0.085
0.09
0.095
0.1
0.08
0.09
0.1
0.11
0.12
0.13
0.14
0.15
0.16
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
x 10
4
Maximum ozone level at Conyers in stage 3
Maximum ozone level at South DeKalb in stage 3
O
p
t i m
i z
e
d
c
o
s
t
0.075
0.08
0.085
0.09
0.095
0.1
0.08
0.09
0.1
0.11
0.12
0.13
0.14
0.15
0.16
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
x 10
4
Maximum ozone level at Conyers in stage 3
Maximum ozone level at South DeKalb in stage 3
O
p
t i m
a
l c
o
s
t p
r e
d
i c
t e
d
b
y
M
A
R
S
0
1
2
3
4
5
6
7
x 10
5
0
1
2
3
4
5
x 10
5
0
0.5
1
1.5
2
2.5
3
3.5
4
x 10
4
Emission from square region source (3,3) in Stage 1
O
p
t i m
i z
e
d
c
o
s
t
0
1
2
3
4
5
6
7
x 10
5
0
1
2
3
4
5
x 10
5
0
0.5
1
1.5
2
2.5
3
3.5
x 10
4
O
p
t i m
a
l c
o
s
t p
r e
d
i c
t e
d
b
y
M
A
R
S
Future Value Function
Multivariate Adaptive
Regression Splines
Stage-4
Stage-3
Convex Future Value Function
Shih et al. (2012)
Victoria Chen
Stage--2
Stage-1
Convex Future Value Function?
Future Value Function
Multivariate Adaptive
Regression Splines
0
0.5
1
1.5
2
2.5
3
x 10
5
0.04
0.045
0.05
0.055
0.06
0.065
0.07
0.075
0
100
200
300
400
500
600
700
800
900
Emission from square region source (3,2) in Stage 1 Max ozone level at Tucker in Stage 1
O
p
t i m
i z
e
d
c
o
s
t
0
0.5
1
1.5
2
2.5
3
x 10
5
0.04
0.045
0.05
0.055
0.06
0.065
0.07
0.075
0
100
200
300
400
500
600
Emission from square region source (3,2) in Stage 1 Max ozone level at Tucker in Stage 1
O
p
t i m
i l c
o
s
t p
r e
c
i t e
d
b
y
M
A
R
S
0.019
0.02
0.021
0.022
0.023
0.024
0.025
0.026
0.027
0
0.5
1
1.5
2
2.5
x 10
5
0
500
1000
1500
2000
2500
Initial max ozone level at Tucker
Initial emission from square source (3,3)
O
p
t i m
i z
e
d
c
o
s
t
0.019
0.02
0.021
0.022
0.023
0.024
0.025
0.026
0.027
0
0.5
1
1.5
2
2.5
x 10
5
0
500
1000
1500
Initial max ozone level at Tucker
Initial emission from square source (3,3)
O
p
t i m
a
l c
o
s
t p
r e
d
i c
t e
d
b
y
M
A
R
S
Victoria Chen
1
2
3
4
5
1
2
3
4
5
0
100000
200000
300000
400000
500000
Reduction
X
Y
Stage 2
1
2
3
4
5
1
2
3
4
5
0
100000
200000
300000
400000
500000
600000
700000
800000
Reduction
X
Y
Stage 1
Emission reductions grouped over the 55 grid regions

Atlanta Base Case Scenario Control Policy
Note:
Point source 4 contributes 77.20% of the
reduction shown in grid region (1,4).
Point sources 5 and 6 contribute 6.23%
and 7.05% of the reduction shown in grid
region (3,3).
Note:
Point source 5 contributes 10.94%
of the reduction shown in grid
region (3,3).
Stage 2: 10:00 AM 1:00 PM Stage 1: 7:00 AM 10:00 AM
Victoria Chen
Emission reductions grouped over the 55 grid regions

Atlanta Base Case Scenario Control Policy
1
2
3
4
5
1
2
3
4
5
0
50000
100000
150000
200000
250000
300000
350000
400000
Reduction
X
Y
Stage 3
1
2
3
4
5
1
2
3
4
5
0
50000
100000
150000
200000
250000
Reduction
X
Y
Stage 4
Note:
Point sources 3 and 4 contribute 53.39%
and 31.53% of the reduction shown in
grid region (1,4).
Point source 6 contributes 12.41% of the
reduction shown in grid region (3,3).
Stage 4: 4:00 PM 7:00 PM Stage 3: 1:00 PM 4:00 PM
Victoria Chen
Atlanta Base Case Scenario Ozone
Two Cases With Nominal Initial State Vector
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0 1 2 3 4
Time Period
M
a
x
i
m
u
m

O
3

(
p
p
m
v
)
SDP Control
EPA Standard
No Control
UAM maximum hourly-averaged ozone in each time period
4 a.m. 7 a.m (no controls during this time period)
7 a.m. 10 a.m, 10 a.m. 1 p.m, 1 p.m. 4p.m, 4 p.m. 7 p.m
Victoria Chen
Using across-the-board approach
Reduction from total base case emissions over 24 hours.

Using DMF/SDP controls (over 50 hypothetical scenarios)
Reduction from total base case in each time period.
Atlanta DMF: Cost-Effectiveness
% Reduction Daily max. Ozone (ppm)
60% 0.12110
50% 0.13051
7am 10am 10am 1pm 1pm 4pm 4pm 7pm
Maximum 55.21% 38.22% 44.63% 13.63%
Minimum 45.49% 8.95% 24.77% 3.38%
Average 52.80% 25.50% 33.62% 6.47%
Victoria Chen
Pre-treatment
Evaluation with
Initial Treatment
Mid-treatment
Evaluation with
Modified
Treatment
Post-treatment
Evaluation
Stage 2
Stage 1
Adaptive Treatment Strategy: A set of decision rules or
treatments in which patients are treated sequentially based on
their characteristics and heterogeneous responses over
multiple stages. (Murphy 2003)
Interdisciplinary Pain Management
Robbins et al. (2003)
The Eugene McDermott Center for Pain Management
at UT Southwestern Medical Center in Dallas (The Center)
Victoria Chen
Stage 1 Stage 2
State
Variables
Preliminary outcome measures
(PreOSW, PrePDA)
Patients background (12)
Surgical histories (5)
Physical histories (13)
Past diagnoses (12)
Past treatment (14)
All stage 1 state, decision, and
outcome variables
Decision
Variables
Pharmaceutical treatments (8)
Procedural treatments (6)
Pharmaceutical treatments (8)
Procedural treatments (5)
Predict
Outcome
Measures
MidOSW
MidPDA
PostOSW
PostPDA
State Transition and Outcome Modeling
Victoria Chen
L
t
---- patient variables in stage t
A
t
---- treatment in stage t
Y ---- final outcome
What can we do?
L
2
is affected by treatment A
1
, but it also confounds the treatment
effect of A
2
on Y. (Robins 1999)
Y
L
1
Pain Management Causal Diagram
L
2
A
1
A
2
Victoria Chen
41
Existing Approaches:
Conventional methods: matching and propensity score
methods. (Weitzen et al. 2004, DAgostino 2007)
Instrumental variable method. (Hogan et al 2004)
G-estimation. (Moodie et al. 2009)
Inverse-probability-of-treatment weighting (IPTW):
Estimates the treatment effect by performing a weighted
analysis. (Robins 1999)

Current Research
Outcome and state transition modeling handling the problem of
endogeneity via IPTW approach. (LeBoulluec et al. 2013)
Endogeneity
Victoria Chen
Concluding Remarks
Data mining variable selection methods enable
dimension reduction.
Design of experiments enables efficient sampling of
state or decision spaces.
Statistical modeling enables parsimonious
approximation of unknown functions.
Statistical methods enable handling of complex data
in real-world decision-making problems.
Victoria Chen

Thank you!

vchen@uta.edu
Victoria Chen
Abara, J. (1989). Applying Integer Linear Programming to the Fleet
Assignment Problem. Interfaces, 19(4), pp. 2028.
Birge, J. R. and F. Louveaux (1997). Introduction to Stochastic
Programming. New York: Springer.
Chen, V. C. P., K.-L. Tsui, R. R. Barton, and M. Meckesheimer
(2006). Design, Modeling, and Applications of Computer
Experiments. IIE Transactions, 38, pp. 273291.
Sacks, J., Welch, W.J., Mitchell, T.J. and Wynn, H.P. (1989). Design
and Analysis of Computer Experiments. Statistical Science, 4,
pp. 409423
Pilla, V. L., J. M. Rosenberger, V. C. P. Chen, and B. C. Smith (2008).
A Statistical Computer Experiments Approach to Airline Fleet
Assignment. IIE Transactions, 40(5), pp. 524537. COSMOS
Technical Report 05-03.
References
Victoria Chen
Pilla, V. L., J. M. Rosenberger, V. C. P. Chen, N. Engsuwan, and S.
Siddappa (2012). A Multivariate Adaptive Regression Splines Cutting
Plane Approach for Solving a Two-Stage Stochastic Programming
Fleet Assignment Model . European Journal of Operational
Research, 16(1), pp. 162171. COSMOS Technical Report 10-06.
Shih, D. T., S. B. Kim, V. C. P. Chen, J. M. Rosenberger, and V. L.
Pilla (2013). Efficient Computer Experiment-Based Optimization
through Variable Selection. Annals of Operations Research, Special
Issue on Data Mining and Informatics, to appear. COSMOS Technical
Report 07-02.
Benjamini, Y. and Y. Hochberg (1995). Controlling the False
Discovery Rate: A Practical and Powerful Approach to Multiple
Testing. Journal of the Royal Statistical Society, Series B, 57,
289300.
References
Victoria Chen
Jolliffe, I. T. (2002). Principal Components Analysis, New York:
Springer.
Mitchell, T. M. (1997). Machine Learning, New York: McGraw-Hill.
Friedman, J. H. (1991). Multivariate Adaptive Regression Splines
(with discussion). Annals of Statistics, 19(1), 1141.
Yang, Z., V. C. P. Chen, M. E. Chang, T. E. Murphy, and J. C. C. Tsai
(2007). Mining and Modeling for a Metropolitan Atlanta Ozone
Pollution Decision-Making Framework. IIE Transactions, Special
Issue on Data Mining, 39, pp. 607615. COSMOS Technical Report
04-06.
Yang, Z., V. C. P. Chen, M. E. Chang, M. L. Sattler, and A. Wen
(2009). A Decision-Making Framework for Ozone Pollution Control.
Operations Research, 57(2), pp, 484498. COSMOS Technical Report
05-04.
References
Victoria Chen
Bellman, R. (1957). Dynamic Programming. Princeton, NJ: Princeton
University Press
Chen, V. C. P., D. Ruppert, and C. A. Shoemaker (1999). Applying
Experimental Design and Regression Splines to High-Dimensional
Continuous-State Stochastic Dynamic Programming. Operations
Research, 47, 3853.
Cervellera, C., V. C. P. Chen, and A. Wen (2006). Optimization of a
Large-Scale Water Reservoir Network by Stochastic Dynamic
Programming with Efficient State Space Discretization. European
Journal of Operational Research, 171, 11391151.
Shih, D. T., D. L. Martinez, V. C. P. Chen, and S. B. Kim (2012). A
Convex Version of Multivariate Adaptive Regression Splines.
COSMOS Technical Report 12-01.
Murphy, S. A. (2003). Optimal Dynamic Treatment Regimes.
Journal of the Royal Statistical Society, Series B, 65(2), pp. 331355.
References
Victoria Chen
Robbins, H., R. J. Gatchel, C. Noe, N. Gajraj, P. B. Polatin, M.
Deschner, A. Vakharia, and L. Adams (2003). A Prospective One-
year Outcome Study of Interdisciplinary Chronic Pain Management:
Compromising Its Efficacy by Managed Care Policies. Anesthesia
and Analgesia, 97, pp. 156162.
Robins, J. M. (1999). Association, Causation, and Marginal
Structural Models. Synthese, 121, pp. 151179.
Weitzen, S., Lapane, K. L., Toledano, A. Y., Hume, A. L., and Mor, V.
(2004). Principles for Modeling Propensity Scores in Medical
Research: A Systematic Literature Review. Pharmacoepidemiology
and Drug Safety, 13, pp. 841853.
DAgostino, R. B. (2007). Estimating Treatment Effects Using
Observational Data. Journal of the American Medical Association,
297(3), pp. 314316.
References
Victoria Chen
Hogan, J. W., and Lancaster, T. (2004). Instrumental Variables and
Inverse Probability Weighting for Causal Inference from Longitudinal
Observational Studies. Statistical Methods in Medical Research, 13,
pp. 1748.
Moodie, E. E. M., R. W. Platt, and M. S. Kramer (2009). Estimating
Response-Maximized Decision Rules With Applications to
Breastfeeding. Journal of the American Statistical Association, 104,
pp. 155-165.
LeBoulluec, A. K., L. Zeng, V. C. P. Chen, J. M. Rosenberger, and R.
J. Gatchel (2013). Outcome and State Transition Modeling for
Adaptive Interdisciplinary Pain Management. In Proceedings of the
Industrial and Systems Engineering Research Conference, San Juan,
Puerto Rico, to appear May.

References

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Victoria Chen

Center on Stochastic Modeling, Optimization, & Statistics

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