Which uncertainty is important in multistage stochastic programmes? A case from maritime transportation

TY - JOUR

T1 - Which uncertainty is important in multistage stochastic programmes?

T2 - A case from maritime transportation

AU - Pantuso, Giovanni

AU - Fagerholt, Kjetil

AU - Wallace, Stein W.

PY - 2017/1

Y1 - 2017/1

N2 - Given that the scope of stochastic programming is to suggest good decisions and not to estimate probability distributions, we demonstrate in this paper how to numerically evaluate which properties of random variables are more important to capture in a stochastic programming model. Such analysis, performed before data collection, can indicate which information should be primarily sought, and which is not critical for the final decision. We apply the analysis to a real-life instance of the maritime fleet renewal. Results show that some properties of the stochastic phenomena, such as the correlation between random variables, have very little influence on the final decision.

AB - Given that the scope of stochastic programming is to suggest good decisions and not to estimate probability distributions, we demonstrate in this paper how to numerically evaluate which properties of random variables are more important to capture in a stochastic programming model. Such analysis, performed before data collection, can indicate which information should be primarily sought, and which is not critical for the final decision. We apply the analysis to a real-life instance of the maritime fleet renewal. Results show that some properties of the stochastic phenomena, such as the correlation between random variables, have very little influence on the final decision.

KW - Fleet planning

KW - Modelling uncertainty

KW - Stochastic programming

U2 - 10.1093/imaman/dpu026

DO - 10.1093/imaman/dpu026

M3 - Journal article

SN - 1471-678X

VL - 28

SP - 5

EP - 17

JO - IMA Journal of Management Mathematics

JF - IMA Journal of Management Mathematics

IS - 1

ER -