Contextual Stochastic Optimization with Decision-Dependent Uncertainty via Nonparametric Learning

Abstract

We study a general decision-dependent contextual stochastic program (DD-CSP) in which uncertainty depends on both exogenous contextual information and endogenous decisions. To learn the potentially complex dependence of uncertainty on decisions and contextual information, we employ several nonparametric regression models, including k nearest neighbors (kNN), classification and regression trees (CART), and ReLU neural networks. To account for estimation errors in predicting the uncertainty, we adopt an empirical residuals-based decision-dependent sample average approximation (ER-DD-SAA) framework, which adds empirical residuals to the point predictions from the learned regression models. For each nonparametric regression model, we develop exact mixed-integer programming (MIP) representations that can be seamlessly embedded within the ER-DD-SAA framework. For two-stage ER-DD-SAA problems with kNN, we further propose a tailored decomposition algorithm, named BD-CG, that combines Bender's decomposition with constraint generation. Under suitable assumptions, we prove that the proposed BD-CG converges to a global optimum within a finite number of iterations. From a statistical perspective, we establish the consistency and asymptotic optimality of ER-DD-SAA with all three nonparametric regression models under mild regularity conditions. Numerical experiments on a newsvendor problem with pricing and a two-stage facility location problem demonstrate that the ER-DD-SAA model with nonparametric learning consistently outperforms a parametric benchmark in out-of-sample performance and the proposed reformulations and algorithm substantially improve computational tractability.