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Decomposition methods in stochastic linear programming: Dual variables

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 Decomposition methods in stochastic linear
programming: Dual variables
Horand I. Gassmann
School of Business Administration
Dalhousie University
Halifax, Nova Scotia, Canada

Abstract
Benders decomposition has been shown to be an ecient method to solve dynamic stochastic linear
programming problems. Upon termination, the method yields optimal values for all the decision variables,
but dual variables (for sensitivity analysis and value of information) are much harder to come by. This
paper describes some possible avenues to pursue. Preliminary numerical results for a standard set of test
problems are also reported.

Introduction
This paper is concerned with computational methods to recover dual variables in multiperiod stochastic
linear programs. An algorithm based on nested Benders decomposition has been shown by Birge [4] and
Gassmann [12] to be a computationally viable strategy to nd the primal variables, but no attention has been
given to the dual variables. Recovering the dual variables is of interest in obtaining the value of information
(Rockafellar and Wets [19], Dempster [6,7]), since various renement schemes could then be implemented
which identify \important" points in the distribution of the random elements.
Only discrete random variables will be considered in this paper, so that the stochastic linear program-
ming problem can be solved by working on the deterministic equivalent problem, which is a large scale
(deterministic) LP.
Work on decomposition methods has been appearing since the publication of the rst papers by Dantzig
and Wolfe [5] and Benders [2]. It is known that the two methods are equivalent if applied to problems that
are dual to each other.
Ho and various co-authors (Ho and Manne [15], Ho and Loute [14], Ament et al. [2]) produced a series
of papers about Dantzig-Wolfe decomposition, showing that the method terminates with the optimal dual
variables and describing ways to recover the optimal primal variables.
Benders decomposition was studied by Abrahamson [1], Wittrock [24] and Scott [22]. If this method is
used, the optimal primal decision variables are obtained directly upon termination, but the dual variables
will have to be recovered later. Because of the duality between Dantzig-Wolfe and Benders decomposition,
it is possible to translate (dualize) the methods of Ho and Manne [15] to this purpose.
Fourer [9,10] describes a specialized version of the simplex algorithm to take advantage of the special
structure of staircase problems. His method is not a decomposition method at all and does not have to solve
1
subproblems over and over with slight modications based on partial information gained during previous
iterations.

Stochastic problems involve variable replication arising from the dierent values of the random param-
eters. The number of replications grows from period to period, so a straight application of deterministic
decomposition methods leads to larger and larger subproblems. These subproblems exhibit a great deal of
special structure that has to be exploited. Benders decomposition was adapted to this setup by Van Slyke and
Wets [23] for two-period problems and extended to more than two periods by Birge [4] and Gassmann [12].
Some additional computational results are reported in Gassmann [11].

A similar algorithm is also described in Ruszczynski [21]. His algorithm uses a regularizing quadratic
term that is designed to stabilize the primal variables so that they do not uctuate too much from one
iteration of a subproblem solution to the next. The quadratic function has a particularly simple form, and
this structure can be exploited to speed up computation.

Dempster [7] and Rockafellar and Wets [20] describe alternative methods for solving the stochastic
programming problem based on augmented Lagrangian techniques. Mulvey and Vladimirou [16,17,18] re-
port some computational success with an experimental implementation of Rockafellar and Wets' algorithm.
Dempster et al. [8] gives a comparison and preliminary relative evaluation of Lagrangian techniques versus
Benders decomposition which strongly favors the latter.

Deterministic staircase problems

The deterministic version of the multiperiod linear programming problem considered in this paper can
be formulated mathematically as follows:

min c00x0 + c01 x1 + ::: + c0 x

T T

s: t: A0 x0 = b0
B1 x0 + A1 x1 = b1
... (1)
B x
T T 1 +A x = b
T T T

x  0; t = 1; : : :; T
t

In this form it is amenable to solution by repeated application of Benders decomposition, as the detached
2
coecient structure clearly shows:
c00 c01


c0
T 1 c0
T

A0 b0

B1 A1 b1
... ..
.
B T A T bT

The rst period problem

min c00 x0
s: t: A0 x0 = b0 (2)
x0  0
is taken as the master problem; information gained in its solution is passed on to future periods as the
modied right hand side b1 B1 x^0. The subproblem is made up of periods 2 to T and has the same
structure as the original problem (1), so the decomposition process can be repeated. This process continues
until each period stands by itself. The problem at period two acts both as the subproblem for the period
one problem and as a master problem for the period three problem which in turn acts as the master for the
problem at period four and so on. In the hierarchy of problems the depth increases as time increases. The
problem at period T is at the bottom of the heap.
Primal information is moved forward in time \down the staircase" to form new proposals for the right
hand sides for the next subproblem, dual information is moved in the opposite direction, backward in time,
to dene feasibility and optimality cuts.
Upon termination, This procedure is well-known to yield the optimal primal variables (if they exist) in
a nite number of steps as the primal solutions to all the subproblems. Dual variables have to be xed up
in a phase III method analogous to [15].
Lemma 1.
Assume (^x0; ^0 ) and (^u00 ; ^00; ^00 ) are, respectively, the optimal primal and dual variables for the rst
period master problem
min c00 x0 + 0 (2.1)
s: t: A0 x0 = b0 (2.2)
D0 x0  d0 (2.3)
E0 x0 + 0 1  e0 (2.4)
3
 x0  0:
Then x^0 and u^00 form part of the optimal solution to the full deterministic staircase problem (1).
Proof. 1. T = 2.
The feasibility cuts (2.3) can be rewritten as
V0 B1 x0  V0 b1;
where the rows of V0 correspond to a collection of extreme rays fv0 g of the dual to the subproblem
i

min c01 x1
s: t: A1 x1 = b1 B1 x0 (4)
x1  0
which implies that v0 A1 = 0 for each row v0 of V0 .
i i

In the same way, the optimality cuts (2.4) can be rewritten as

W0 B1 x0 + 0  W0 b1 ;
where the rows of W0 correspond to a collection of extreme columns fw0 g of the dual to (4), i.e., they satisfy
i

w0 A1 = c1.
i

Now (^u00; ^00 ; ^ 00 ) are dual feasible for (2), so that u^00 A0 + ^00 D0 + ^00 E0 = c00 , ^00 1 = 1 and ^0 ; ^0  0.
Dene u~01 = ^00 V0 + ^00 W0 . Then u~01 A1 = (^00 V0 + ^00 W0 )A1 = ^00 0 + ^00 1c01 = c01 and u^00A0 + u~01 B1 =
u^00A0 + ^00 V0 B1 + ^00 W0 B1 = u^00 A0 + ^00 D0 + ^00 E0 = c00, which proves that (^u00; u~01) is dual feasible for (4).
Moreover, u^00b0 + u~01b1 = u^00b0 + ^00 V0 b1 + ^00 W0b1 = u^00 b0 + ^00 d0 + ^00 e0 = c00 x^0 + ^0 = c00x^0 + c01x^1 . The
last relationship follows from the stopping criterion of the nested Benders decomposition method.
2. For T = 3 observe that the cuts (2.3) and (2.4) can be derived either from the second stage problem
min c01 x1 + 1
s: t: A1 x1 = b1 B1 x0
D1 x1  d1
E1x1 + 1 1  e1
x1  0:
or from the aggregate problem
min c01 x1 + c02x2
s: t: A1 x1 = b1
B2 x1 + A2 x2 = b2
x1 0
x2  0;
by application of part 1. The general case then follows by stepwise reduction from T to T 1, T 2, etc.

4
 By storing the matrices V and W one therefore has a method to recover the dual variables one period
t t

at a time. Initially, u^00 are the optimal dual variables from the master problem at period 1. For time periods
t > 1 set u^0 +1 = ^0 V + ^ 0 W , where V and W are the matrices of extreme rays and extreme points used to
t t t t t t t

dene the cuts for the period t problems.

Problem 1 could also be solved by Dantzig-Wolfe decomposition. An obvious approach would be to
take the transpose of the problem and decompose this dual problem. This approach is not particularly
interesting and does not lead to any new insights, because of the strong dual relationship between Benders
decomposition and Dantzig-Wolfe decomposition. More specically, the Dantzig-Wolfe procedure on the
dual problem stops with the optimal dual variables of the transposed problem, and the primal variables have
to be xed up later. But the dual variables of the transposed problem are the primal variables of the original
problem, so very little has been gained. Still, the transpose may be easier to solve in some instances.
More interesting is to apply Dantzig-Wolfe decomposition to the primal problem itself. After suitably
rearranging the rows and columns of the problem one obtains the following schematic representation:

c0
T
c0
T 1 c0
T 2



c00

AT B T b
T

A T 1 B T 1

... ..
.
A0 b0

Here the master problem is the period T problem, and the hierarchy of problems is running backwards
in time. After a nite number of steps the Dantzig-Wolfe decomposition method stops with the optimal
dual variables, but the primal solution has to be xed up in a phase III method analogous to the iterative
procedure described before.

Stochastic staircase problems

The multiperiod stochastic linear programming problem takes the same form as (1) except that some of
the entries in the LP are (discrete) random variables with known distribution. With variable replication for
each realization of the random elements, one obtains the so-called deterministic equivalent , which is a large
scale linear programming problem of the form

P P PT
min c00 x0 p 1 c0 1 x 1 + p 2 c0 2 x 2 +


+ p T c0 T x T
K1 K2 K
+ k k k k k k k k k
k1 =1 k2 =K1 +1 T =KT 1 +1
k

5
 s: t: A0 x0 = b0
B 1 x0 + A 1 x 1
k k k = b 1 ; k1 = 1; : : :; K1
k

B 2 x ( 2) + A 2 x 2
k a k k k = b 2 ; k2 = K1 + 1; : : :; K2
k

... ..
. (5)
B T x ( T) + A T x T
k a k k k = b T ; k = K 1 + 1; : : :; K
k T T T

x t0
k t = 1; : : :; T:

If the random variables exhibit period-to-period independence, then the number of replications grows
geometrically from one time period to the next.
What makes the problem computationally tractable is the fact that the subproblems arising from an
application of Benders decomposition are separable, so that in the end all that has to be solved to obtain a
primal feasible solution are problems of the form
min c0 t x
k k t + t
k (6.1)
s: t: A t x
k t k = b t B tx k k t 1;a(kt) (6.2)
D tx t
k k d t k (6.3)
E tx t +  t 1  e t
k k k k (6.4)
x t  0;
k

where a(k ) is used to denote the immediate ancestor of node k in the decision tree.
t t

The iterative procedure of the last section can be used again to recover the dual variables in a phase III
of Benders decomposition, at the cost of storing all the dual variables used to calculate the active cuts. The
next section will investigate the possibility of nding the dual variables without storing all this information.
Dantzig-Wolfe decomposition, on the other hand, uses the period T problem as the master problem, and
this problem can not be decomposed further, so a direct computation of the dual variables appears dicult
in this setup.

A Lagrangian method
Proposition 1.
When the decomposition method stops, the dual variables u^00 associated with constraints (7.2) of the
rst-period subproblem
min c00x0 + 0 (7.1)
s: t: A0x0 = b0 (7.2)
D0 x0  d0 (7.3)
E0x0 + 0 1  e0 (7.4)
x0  0:

form part of the optimal dual solution.

6
Proof. (See lemma 1.)
Now aggregate periods 1 and 2 to form the two-period subproblem
P
min c00x0 + p 1 c0 1 x 1 + P p 1  1
K1 1 K

k k k k k
k1 =1 k1 =1

s: t: A0x0 = b0 (8.2)
B 1 x0
k + A 1xk k1 =b 1 k (8.3)
D 1x 1
k k d 1 k (8.4)
E 1x 1 +  11
k k k e 1 k (8.5)
x0; x 1  0;
k k1 = 1; : : :; K1:

where the constraints (8.4) and (8.5) consist of all the cuts which are active in all the period two subproblems
upon termination of the decomposition routine.
In the same way as lemma 1 one proves that the dual variables u^00 and u^0 1 corresponding to constraints k

(8.2) and (8.3), respectively, are part of the optimal dual solution to (5).
Similarly we have the t-period LP problem
P1 P Pt Pt
min c00x0 + p 1 c0 1 x 1 + p 2 c0 2 x 2 +


+ p t c0 t x t +
K K2 K K

k k k k k k k k k p t t
k k
k1 =1 k2 =K1 +1 t=Kt 1 +1
k k t=Kt 1 +1
s: t: A0 x0 = b0
B 1 x0 + A 1 x 1
k k k = b 1 ; k1 = 1; : : :; K1
k

B 2 x ( 2) + A 2 x 2
k a k k k = b 2 ; k2 = K1 + 1; : : :; K2
k

... ..
.
B t x ( t) + A t x t
k a k k k =b t k

D tx t
k k d t k (9.5)
E tx t
k k +  t1  e t k k (9.6)
x t  0;
k k =K t t 1 + 1; : : :; K :
t

where constraints (9.5) and (9.6) correspond to all the active cuts in all the period t subproblems.
Let (^u00; u^00; : : :; u^0 t ; ^0 t 1 +1 ; : : :; ^0 t ; ^ 0 t 1+1 ; : : :; ^ 0 t ) denote the optimal dual solution to problem (9).
K K K K K

Then (^u00; u^00; : : :; u^0 t ) form part of the optimal dual solution of the full stochastic linear programming prob-
K

lem (3). (This is again an application of lemma 1).

Since the rst period dual variables are known from the period 1 master problem, it is now possible to
nd successively the optimal dual variables in period 2, 3, etc. by repeated solution of problem (5). These
problems rapidly grow in size as t increases, and some simplications are in order.
Consider rst the case t = 2. The optimal dual variables u^00 for the constraints (8.2) are known from
previous work, so it is possible to remove these constraints by putting them into the objective function using
a Lagrangian term. Up to a constant in the objective function, this gives
7
 P
min (c00 u^00 A0)x0 + p 1 c0 1 x 1 + P p 1  1
K1 K1

k k k k k
1 =1
k 1 =1 k

s: t: B 1 x0
k + A 1x 1 k k =b 1 k (10.3)
D 1x 1 k k d 1 k (10.4)
E 1x 1 +  11
k k e 1 k k (10.5)
x0; x 1  0: k

This problem does not decompose, because (10.3) provides linkage between the dierent realizations in
period 2, but with a warm start the computational eort is moderate. A reasonably good starting basis
is given by assembling the bases that were optimal for the second period subproblems upon termination of
phase II. This starting basis is block-diagonal, so it can be inverted readily. Moreover, since the rst period
primal decision variables have also been identied, all the entering variables are known. They correspond to
those components of x^00 that were basic in cuts in the master problem. (Note that the rst period cuts have
disappeared from problem (10).) Typically the number of active constraints is small, so few iterations are
required to solve problem (10) to optimality.
Now consider the case t = 3. As formulated, problem (9) is not separable, but the rst and second
period dual variables u^00; u^00; : : :; u^0 1 have been identied. These constraints can therefore be eliminated by
K

putting them into the objective. This gives the following equivalent representation:

P
min (c00 u^00A0 p 1 u^0 1 B 1 )x0 + P p 1 (c0 1 u^0 1 A 1 )x 1 + P p 2 c0 2 x 2 + P p 2  2
K1 1 K 2 2 K K

k k k k k k k k k k k k k
1 =1
k 1 =1k 2 = 1 +1 2 = 1 +1
k K k K

s: t: B 2 x ( 2) + A 2 x 2
k a k k k =b 2 k

D 2x 2
k k d 2 k

E 2x 2 +  2 1  e 2
k k k k

x 20k ; k2 = K1 + 1; : : :; K2
This problem is (partially) separable; there is one separate two-stage subproblem for each realization of
the second period random elements. Again, a good starting basis is available, and all the entering variables
have been identied at the end of phase II.
The same idea works for general t: Because of the staircase structure of the stochastic linear program-
ming problem, the dual variables can be found by solving a number of two-stage problems.

Computational results
These ideas were coded into a modication of the experimental stochastic programming code MSLiP
(see [12]) and applied to a number of standard test problems from the Ho and Loute [13] set of staircase
problems as randomized by Birge [4]. Table 1 shows the number of simplex iterations and CPU times
during the solution phase of the algorithm and during the computation of dual variables. These gures
8
 are somewhat dicult to interpret, because the problem size in phase III is larger than the problem size in
phase I and II. It should also be remembered that the decomposition phase uses a relatively polished code,
whereas the dual variable routine is a rst rough implementation. What comes out, though, is the relatively
modest number of simplex iterations in phase III and a CPU time which compares favorably with phase I
and II, especially on the larger problems. The overall advantage of Benders decomposition over the simplex
algorithm (demonstrated in Gassmann [11,12]) is not seriously compromised by the added work necessary
to recover the dual variables.
Problem Iterations Time (sec.)
Phase I and II Phase III Input Phase I and II Phase III
SC205/3 55 12 3.6 3.5 10.4
SCRS8/3 109 14 4.4 10.0 105.4
SCSD8/3 80 79 6.6 9.4 96.9
SCAGR7/3 259 17 4.0 23.3 22.9
SCTAP1/3 129 45 6.0 17.3 84.1
SCFXM1/4 5106 178 11.0 1811.4 244.0
FOR1/7 11078 200 6.5 604.3 75.2
FOR2/7 72230 455 7.2 4031.8 557.1

Table 1. Numerical results.

Nonanticipativity constraints
As demonstrated in Rockafellar and Wets [19] and Dempster [6,7], the expected value of perfect infor-
mation for a stochastic programming problem can be inferred from its information prices. These are dual
variables associated with nonanticipativity constraints which state, in essence, that the decision variables in
period t have to be chosen before the random variables in periods t + 1; : : :; T have been observed. These
constraints have been substituted implicitly into formulation (5) and in general have alternative implicit [19]
and explicit [6,7] representations. An explicit account can also be taken by using the following equivalent
program.

PT  
p T c00 x1 T + c0 1 ( T ) x2 T + c0 2 ( T ) x3 T +


+ c0 T x
K
min k ;k a k ;k a k ;k k T
T ;k
kT =KT 1 +1
s: t: A0 x1 T
;k = b0
B 1 ( T ) x1 T + A 1 ( T ) x2 T
a k ;k a k ;k = b 1(
a k T)
B 2 ( T ) x2 T + A 2 ( T ) x3
a k ;k a k T
;k = b 2(
a k T)

... ..
. (12)
B Tx 1 T +A Tx
k T ;k k T ;k T = b T;
k k = K 1 + 1; : : :; K
T T T

x T  0;
t;k t = 1; : : :; T:
x0 x1 T
;k =0
9
 x 1( T )
a k x2;k T =0







xT
a 1 (kT ) xT 1;kT = 0; k =K
T T 1 + 1; : : :; K
T

where a (k ) denotes the (unique) node in period t which is an ancestor of terminal node k in the decision
t T T

tree.
This program is much larger than (5) because of the explicit replication of each decision variable for
each terminal node in the decision tree. It also is not a staircase problem any more. On the other hand,
there is no need to solve problem (12) from scratch. Instead one should work with problem (5) as long as
possible. Once an optimal basis for (5) has been identied, one can construct an optimal basis for (12): If a
variable in (5) is o its bounds, then all its replications in (12) must belong to the optimal basis. Once this
basis has been constructed, it can be inverted (taking advantage of special structure) to nd the optimal
dual variables. This will be the topic of future research.
Summary
This paper explored methods to compute the optimal dual variables for the multistage stochastic linear
programming problem. If the problem exhibits staircase structure, then the dual variables can be obtained
by solving problems which aggregate two periods at a time, consisting of a non-terminal node together with
all its immediate descendants. Numerical results indicate that the computational eort is not unreasonable.
Acknowledgements
This research was supported in part by a grant from the Natural Sciences and Engineering Research
Council of Canada (NSERC).
I am grateful to M.A.H. Dempster for many fruitful discussions on this topic.

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