Linear programming with stochastic processes as parameters as applied to production planning (Q1178434)

A generalization of the Dantzig-Madanski two-stage scheme and Charnes- Cooper's chance-constrained programming is given to model some situations where the requirement vector is assumed to be a random process of Brownian motion type. The classical two-stage problem can be presented in the form \(\min\{c'x+E_ \xi(\min q'y)| Ax+Wy\leq\xi\), \(y\geq 0\), \(x\in S\}\). The modification is formulated as follows: \(\min\{c'x+E_ \xi(\min q'y)+\sum_ i p_ i E[\tau_ i(\sum_ j a_{ij} x_ j)-t_ 1]^ - \}\), subject to \(Ax+W\xi>\xi(t_ 1)\), \(y\geq 0\), \(x\in S\), \(Pr\{\tau_ i(\sum b_{ij}x_ j)\geq t_ 1\}>\alpha_ i\), where \(\tau_ i(v)\) is the time it takes for \(\xi_ i(t)\) to hit \(v\) for the first time. The \(3-d\) term in the goal function reflects penalties for the violations of each constraint, \(\sum a_{ij}x_ j\leq\xi_ i(t)\). The additional constraints ensure that with a high probability the inequalities \(\sum b_{ij}x_ j\geq \xi_ i(t_ 1)\) are satisfied on \([0,t_ 1]\). It is proved that, under some additional conditions, the problem is equivalent to a convex program. A simple numerical example is given. In conclusion, a periodic review model is described which is a discrete analogue to the basic continuous one.