EXPECTED UTILITY, PENALTY FUNCTIONS, AND DUALITY IN STOCHASTIC NONLINEAR PROGRAMMING.

Aharon Ben-Tal, Marc Teboulle

Research output: Contribution to journalArticlepeer-review

Abstract

The authors consider nonlinear programming problem (P) with stochastic constraints. The Lagrangean corresponding to such problems has a stochastic part, which in this work is replaced by its certainty equivalent (in the sense of expected utility theory). It is shown that the deterministic surrogate problem (CE-P) thus obtained, contains a penalty function which penalizes violation of the constraints in the mean. The approach is related to several known methods in stochastic programming such as: chance constraints, stochastic goal programming, reliability programming and mean-variance analysis.

Original languageEnglish
Pages (from-to)1445-1466
Number of pages22
JournalManagement Science
Volume32
Issue number11
DOIs
StatePublished - 1986
Externally publishedYes

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