Robust dual dynamic programming

Abstract

Multistage robust optimization problems, where the decision maker can dynamically react to consecutively observed realizations of the uncertain problem parameters, pose formidable theoretical and computational challenges. As a result, the existing solution approaches for this problem class typically determine suboptimal solutions under restrictive assumptions. In this paper, we propose a robust dual dynamic programming (RDDP) scheme for multistage robust optimization problems. The RDDP scheme takes advantage of the decomposable nature of these problems by bounding the costs arising in the future stages through lower and upper cost-to-go functions. For problems with uncertain technology matrices and/or constraint right-hand sides, our RDDP scheme determines an optimal solution in finite time. Also, if the objective function and/or the recourse matrices are uncertain, our method converges asymptotically (but deterministically) to an optimal solution. Our RDDP scheme does not require a relatively complete recourse, and it offers deterministic upper and lower bounds throughout the execution of the algorithm. We show the promising performance of our algorithm in a stylized inventory management problem. © 2019 INFORMS.