Expectation and Chance-Constrained Models and Algorithms for Insuring Critical Paths

Authors:
Siqian Shen;J. Cole Smith;Shabbir Ahmed
Affiliations:
Department of Industrial and Systems Engineering, University of Florida, Gainesville, Florida 32611;Department of Industrial and Systems Engineering, University of Florida, Gainesville, Florida 32611;H. Milton Stewart School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332
Venue:
Management Science
Year:
2010

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Abstract

In this paper, we consider a class of two-stage stochastic optimization problems arising in the protection of vital arcs in a critical path network. A project is completed after a series of dependent tasks are all finished. We analyze a problem in which task finishing times are uncertain but can be insured a priori to mitigate potential delays. A decision maker must trade off costs incurred in insuring arcs with expected penalties associated with late project completion times, where lateness penalties are assumed to be lower semicontinuous nondecreasing functions of completion time. We provide decomposition strategies to solve this problem with respect to either convex or nonconvex penalty functions. In particular, for the nonconvex penalty case, we employ the reformulation-linearization technique to make the problem amenable to solution via Benders decomposition. We also consider a chance-constrained version of this problem, in which the probability of completing a project on time is sufficiently large. We demonstrate the computational efficacy of our approach by testing a set of size-and-complexity diversified problems, using the sample average approximation method to guide our scenario generation.