SATEMATIKA, 2008, Special Edition Part Il, 505-512 44 Department of Mathematics, UTM CHARACTERISTICS OF DETERMINISTIC EQUIVALENT MODEL FOR MULTI-STAGE MIXED INTEGER STOCHASTIC PROGRAMS Urvan, *Herman Mawengkang Department of Mathematics, The University of Sumatera Utara Rbetract Stochastic programming is an important tool in medium to long term planning where there are uncertainties inthe data. In this paper, we consider multi-stage mixed integer stechaste a eodel ta neeS model. The model is not well defined, since there are random vectors imposed in the ‘model to present the uncertainties of the model parameter. Therefore a revision of the ‘modeling is shat edling to so-called deterministic equivalents ofthe original model. This paper diseut-es about how to get the deterministic equivalent model and the characteristics of the reeatt mac 1 Introduction Medium to long term planning is essential to the success of business and Project management. In these applications the problem can be divided into multiple stages, usually over tome. Dynamic programming the ability to quantify the risk in different scenarios, Stochastic programming began in the mids 1950s, and was one of the motivations for Dantzig’s seminal ‘This paper discusses about modifying the two-stage stochatic Programming into deterministic Sauivalents model, in such a way that we could solve the original stochastic Programming problem more 2 Stochastic Programs: General Formulation We define the stochastic (linear) program as the following model min go(x,¢) st. £,(x,€)<0, aq)where is a random vector varying over a set EC) !. More precisely, we assume throughout that « Lanuly Fol “events, 1¢ subsets of 5, and the probability distribution P on F are given. Hence for every : sutwet Ac 5 that san events, ie, A € F, the probability P(A) is known. Furthermore, we assume that the functions ¢(1,):5 ->{) Vai are random variables themselves and that the probability distribution P is independent of However, problem (1) is not well define since the meanings of “min: as well as of the constraints are not cleat at all. if we think of taking a decision on x before knowing the realization of & . Therefore a fevision of the modeling process is nevessary, leading to so-called deterministic equivalents for (1), which can be introduced in various ways. 3 Deterministic Equivalents Let us now come back to deterministic equivalents for (1). For instance, in analogy to the particular stovhashc linear program weith recourse, for problem (1) we may proceed as follows. With war 0 ifg.(x.¢)so, £,0,€) otherwise, the th constraint of (1) is violated if and only if g(x.) > 0 for a given decision x and realization € of $. Hence we could provide for each constraint a recourse or second-stage activity y,(€) that, after chserving the reahzation ¢, is chosen such as to compensate its constraints violationvit there is one-by satstying £,(2.5)~9,(§) $0. This extra effort is assumed to cause an extra cost or penalty of 4 per unit, Le our additional costs (called the recourse function) amount to aml Q) LoS) = 8058) + O(x,£) 8) Ox. wmin{ SaaBrin2 45 (oe yielding a total cost-first-stage and recourse cost-of Instead of (2), we might think of a more general linear recourse program with a recourse vector YEE Y CO", (Vis some given polyhedral set, such as {y | y20)), an arbitrary fixed mx matrix w {the recourse matnx) and a corresponding unit cost vector 4 €0", yielding for (3) the Tecourse function x5) =min{g" yl 2 a"(x.8),yer} ® . 7 where 8° (8) = (85 (8) 92058))". i If we think of @ factory producing m products, 8,(4.$) could be understood as the difference 7 » problem (2) could for ‘natance be imterpreted as buying the shortage of products atthe market Prevnee (i) instead cou eal Pe he gq 3 ¢ z 2 f ‘ ctor input y and tom a sod sage or emegeny proton programy cried through with the factor input y and 2 ehnology represented by the matrix WY, Choosing Wl, m x m identity matrix, (2) turns out to "Vath westbo souk think ofa nonearecurse program to dein th recourse function for) or instance Q(Y.g) could be chosen as symyeYcO*}, © Ol g) = min) HZ gy where gil)" (0 and H,:0" 0 aresupposed to be given. : li any case, if it is meaningful and acceptable to the decision maker to minimize the expected Value of the total costs (Le. first-stage and recourse costs), instead of problem (1) we could consider its leterministie equivalent, the (two-stage) stochastic program with recourse min E,fo(%5) = min Ey (g9(x.) + O(x.E)}- © the above Ovo-stage problem is immediately extended to the multistage recourse program as follows: instead of the two decisions x and y, to be taken at stages 1 and 2, we are now faced with K+1 sequential sssisions Xp. 074%, (8, € 0%), to be taken at the subsequent stages + =0,1,---, K.. The term “stages” can, but need not, be interpreted as “times periods”. Assume for simplicity that the objective of (1) is deterministic, ie. B(x.) = g(x). At stage 1(F 21) we know the realizations , of the random vectors &,---, as well as the previous “esisions Xyy-.4,, and we have to decide on x, such that the constraints) (with vector valued constraint functions g. ) Be(or XSi, $0) ‘re satisfied, which-as state-at this stage can only be achieved by the proper choice of ,, based on the ‘nowlege of the previous decisions and realizations, Hence, assuming a cost function 9-(%,), at stage £21 we have a recourse function R= Eq, erie VS yt ZL ence. taking into account the multiple stages, we get as total costs for the multistage problem Lilinsbs AP Cork Basdoo€) 0 prog with course “Avant for the describe dynamic decision problem, the ‘multistage stochastic « ain[soure Fog Qk BiG +4)| ® 507