Stochastic Depletion Problems
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Date: 11-18-2008
Start Time:
1:00pm
End Time: 2:00pm
Speaker: Vivek Farias, Massachusetts Institute of Technology
Location: Uris 333
ABSTRACT
We introduce a general class of dynamic stochastic optimization problems we refer to as Stochastic Depletion Problems. A number of challenging dynamic optimization problems of practical interest are stochastic depletion problems - two examples we will discuss in this talk are the `AdWords' allocation problem and revenue management for a discrete time parallel server queueing model. Optimal solutions for such problems are difficult to obtain, both from a pragmatic computational perspective as also from a theoretical perspective. We isolate two simple properties that, if satisfied by a problem within this class, guarantee that a myopic policy incurs a performance loss of at most 50 % relative to the optimal adaptive control policy for that problem. As a consequence, we identify computationally efficient approximations to optimal control policies for a number of interesting dynamic stochastic optimization problems including the examples above.
BIO
Vivek Farias is J. Spencer Standish (1945) Assistant Professor of Management at MIT. He is interested in the development of new methodologies for large scale dynamic optimization under uncertainty, and the application of these methodologies to the design of practical revenue management strategies across various industries ranging from airlines and retail to online advertising. Professor Farias is a recipient of the 2006 INFORMS MSOM Student Paper prize for a research paper judged to be the best in the field of Operations Management. A consultant in the finance industry, Professor Farias most recently contributed to GMO LLC.'s first successful high-frequency algorithmic trading strategy.