Exploiting partial correlations in distributionally robust optimization

Abstract

In this paper, we identify partial correlation information structures that allow for simpler reformulations in evaluating the maximum expected value of mixed integer linear programs with random objective coefficients. To this end, assuming only the knowledge of the mean and the covariance matrix entries restricted to block-diagonal patterns, we develop a reduced semidefinite programming formulation, the complexity of solving which is related to characterizing a suitable projection of the convex hull of the set { (x, xx′) : x∈ X} where X is the feasible region. In some cases, this lends itself to efficient representations that result in polynomial-time solvable instances, most notably for the distributionally robust appointment scheduling problem with random job durations as well as for computing tight bounds in the newsvendor problem, project evaluation and review technique networks and linear assignment problems. To the best of our knowledge, this is the first example of a distributionally robust optimization formulation for appointment scheduling that permits a tight polynomial-time solvable semidefinite programming reformulation which explicitly captures partially known correlation information between uncertain processing times of the jobs to be scheduled. We also discuss extensions where the random coefficients are assumed to be non-negative and additional overlapping correlation information is available.