On Optimal Allocation of Indivisibles Under Uncertainty

Norkin, V.I., Ermoliev, Y.M., & Ruszczynski, A. (1994). On Optimal Allocation of Indivisibles Under Uncertainty. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-94-021

Preview

Text WP-94-021.pdf Download (749kB) | Preview

Abstract

The optimal use of indivisible resources is often the central issue in the economy and management. One of the main difficulties is the discontinuous nature of the resulting resource allocation problems which may lead to the failure of competitive market allocation mechanisms (unless we agree to "divide" the indivisibles in some indirect way). The problem becomes even more acute when uncertainty of the outcomes of decisions is present.

In this paper we formalize the problem as a stochastic optimization problem involving discrete decision variables and uncertainties. By using some concrete examples, we illustrate how some problems of "dividing indivisibles" under uncertainty can be formalized in such terms. Next, we develop a general methodology to solve such problems based on the concept of the branch and bound method. The main idea of the approach is to process large collections of possible solutions and to devote more attention to the most promising groups. By gathering more information to reduce the uncertainty and by specializing the solution the optimal decision can be found.

Actions (login required)

View Item