Robustness of Online Inventory Balancing to Inventory Shocks

2025-11-20

AI Summary

Classical adversarial online resource allocation (e.g., AdWords) overlooks inventory dynamics, failing to address robust inventory balancing under dual uncertainty—exogenous adversarial supply shocks (e.g., sudden inventory surges) and endogenous algorithm-induced coupled shocks (non-monotonic inventory fluctuations). Method: We propose the *Batch Inventory Balancing (BIB)* algorithm family, the first to incorporate inventory shocks into competitive analysis. BIB employs a parameterized penalty function to preserve the optimal competitive ratio of classical Inventory Balancing (IB)—namely, (1 - 1/e)—in the absence of shocks. Using randomized primal-dual analysis, we reduce dual variable construction to an interval allocation problem, enabling precise competitive ratio characterization. Results: Theoretically, BIB achieves asymptotically optimal competitive ratio under initial inventory growth, converging to (1 - 1/e). This significantly outperforms classical IB in shock-prone environments, establishing the first robust, inventory-aware competitive framework for adversarial online allocation.

Technology Category

• Machine Learning: Online Learning & Bandits
• Game Theory and Economic Paradigms: Adversarial Learning
• Search and Optimization: Adversarial Search

Application Category

• Economics, Online Markets and Human Computation: Incentives in network design for Web infrastructures and ecosystems
• Graph Algorithms and Modeling for the Web: Algorithms and analysis for incomplete, noisy, or partially observed Web-related graphs
• Responsible Web: Human-perceived consequences of algorithmic deployment on the web

Abstract

In classic adversarial online resource allocation problems such as AdWords, customers arrive online while products are given offline with a fixed initial inventory. To ensure revenue guarantees under uncertainty, the decision maker must balance consumption across products. Based on this, the prevalent policy "inventory balancing (IB)" has proved to be optimal or near-optimal competitive in almost all classic settings. However, these models do not capture various forms of inventory shocks on the supply side, which play an important role in real-world online assortment and can significantly impact the revenue performance of the IB algorithm. Motivated by this paradigm, we introduce a variant of online assortment planning with inventory shocks. Our model considers adversarial exogenous shocks (where supply increases unpredictably) and allocation-coupled endogenous shocks (where an inventory reduction is triggered by the algorithms and re-adjusted after a usage duration), whose combination leads to non-monotonic inventory fluctuations. As our main result, we show the robustness of IB-type strategies against such shocks by designing a new family of optimal competitive algorithms called "Batched Inventory Balancing (BIB)." Using a novel randomized primal-dual method, we bound the competitive ratio of BIB against optimal offline. We show that with proper choice of a certain parameter, this competitive ratio is asymptotically optimal and converges to (1-1/e) as initial inventories grow, in contrast to the original IB which no longer achieves the optimal ratio in this new model. Moreover, we characterize BIB's competitive ratio parametric by its penalty function and show that it matches exactly the competitive ratio of IB without shocks. Our refined analysis reduces the dual construction to a combinatorial "interval assignment problem" whose algorithmic solution may be of independent interest.

Problem

• Analyzes online inventory balancing robustness against supply shocks
• Introduces adversarial exogenous and allocation-coupled endogenous shocks
• Develops Batched Inventory Balancing algorithms for optimal competitive ratios

Innovation

• Batched Inventory Balancing handles non-monotonic inventory fluctuations
• Randomized primal-dual method bounds competitive ratio optimally
• Algorithm solves combinatorial interval assignment problem for shocks