Shape – A Stochastic Hybrid Approximation Procedure for Two-Stage Stochastic Programs

Raymond K.-M. Cheung, Warren B. Powell
2000 Operations Research  
We consider the problem of approximating the expected recourse function for two-stage stochastic programs. Our problem is motivated by applications that have special structure, such as an underlying network that allows reasonable approximations to the expected recourse function to be developed. In this paper, we show how these approximations can be improved by combining them with sample gradient information from the true recourse function. For the case of strictly convex nonlinear
more » ... , we prove convergence for this hybrid approximation. The method is attractive for practical reasons because it retains the structure of the approximation.
doi:10.1287/opre. fatcat:q3clfj5z6nbejjjhnlvs67hxom