Closing the Gaps: Optimality of Sample Average Approximation for Data-Driven Newsvendor Problems

arXiv:2407.04900v1 Announce Type: new
Abstract: We study the regret performance of Sample Average Approximation (SAA) for data-driven newsvendor problems with general convex inventory costs. In literature, the optimality of SAA has not been fully established under both alpha-global strong convexity and (alpha,beta)-local strong convexity (alpha-strongly convex within the beta-neighborhood of the optimal quantity) conditions. This paper closes the gaps between regret upper and lower bounds for both conditions. Under the (alpha,beta)-local strong convexity condition, we prove the optimal regret bound of Theta(log T/alpha + 1/ (alphabeta)) for SAA. This upper bound result demonstrates that the regret performance of SAA is only influenced by alpha and not by beta in the long run, enhancing our understanding about how local properties affect the long-term regret performance of decision-making strategies. Under the alpha-global strong convexity condition, we demonstrate that the worst-case regret of any data-driven method is lower bounded by Omega(log T/alpha), which is the first lower bound result that matches the existing upper bound with respect to both parameter alpha and time horizon T. Along the way, we propose to analyze the SAA regret via a new gradient approximation technique, as well as a new class of smooth inverted-hat-shaped hard problem instances that might be of independent interest for the lower bounds of broader data-driven problems.



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