Journal
SIAM JOURNAL ON OPTIMIZATION
Volume 28, Issue 1, Pages 198-222Publisher
SIAM PUBLICATIONS
DOI: 10.1137/16M1098486
Keywords
bilevel programming; stochastic programming; decision rules
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Funding
- Scientific and Technological Research Council of Turkey (TUBITAK) through [BIDEB 2232, 115C100]
- Swiss National Science Foundation [BSCGIO_157733]
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We study two-stage stochastic bilevel programs where the leader chooses a binary here-and-now decision and the follower responds with a continuous wait-and-see decision. Using modern decision rule approximations, we construct lower bounds on an optimistic version and upper bounds on a pessimistic version of the leader's problem. Both bounding problems are equivalent to explicit mixed-integer linear programs that are amenable to efficient numerical solution. The method is illustrated through a facility location problem involving sellers and customers with conflicting preferences.
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