Introduction to Two-Stage Stochastic Optimization (Conceptual)

When the uncertainty in your decision-making process can be captured well by thinking of two stages (today and "tomorrow" or the near future) where "tomorrow" can be split into a number of different scenarios, two-stage stochastic optimization can be a useful modeling tool. For example: a farmer wants to decide what seeds to plant today considering the upcoming weather could be dry, average, or rainy. In this video, we go over the key concepts necessary to understand this type of optimization problem in preparation for an actual business example in the following video:

[shu-boyang]

The schematic picture for illustrating the idea of two-stage stochastic optimization is awesome. It makes everything so intuitive. Thank you for this great video.

[giangdang]

This video actually helps me understand my assignment. Thank you for a very informative video.

[ahmedtawfiq]

Some of the best contents i have found from your channel 👏🏽👏🏽

[amirbaghban]

Thank you for your clear teaching way ...

[sohomchat]

Thanks for the video. Can I use stochastic optimization to make a decision for a scenario that realized which I had not accounted for when I modeled the problem? In other words, is it only useful when I have complete knowledge on the finite number of possible scenarios?

[hullopes]

That was a really good class. Awesome! Tks!!

[zinebelqabli]

dear professor, thank you for your effort, you have explained very well stochastic programming, I want to know if you have other videos on :
- stochastic dynamic programming
- Non-linear programming
- Multi-objective programming
- Fuzzy programming
- Quadratic programming
- linear/integer/mixed linear programming
- Robust optimization
- Dynamic programming

[joelmorley]

In this generalised example, where does the stochasticity appear?

[prashantpant]

Hi professor, I have a small question. Say for example I have to prepare operation schedule for 2 machines- how much they should produce ( I have considered that there is no first stage variable the units are already commited=2). There is uncertainity of supply and demand, making in total S*D (scenarios). The problem is solved and we have one objective value, the solution for the production variable is different for S*D scenarios, but I need to provide one schedule for tomorrow. How to finalize one production schedule for tomorrow considering all the solutions from different scenarios?