A convex version of multivariate adaptive regression splines

Multivariate adpative regression splines (MARS) provide a flexible statistical modeling method that employs forward and backward search algorithms to identify the combination of basis functions that best fits the data and simultaneously conduct variable selection. In optimization, MARS has been used successfully to estimate the unknown functions in stochastic dynamic programming (SDP), stochastic programming, and a Markov decision process, and MARS could be potentially useful in many real world optimization problems where objective (or other) functions need to be estimated from data, such as in simulation optimization. Many optimization methods depend on convexity, but a nonconvex MARS approximation is inherently possible because interaction terms are products of univariate terms. In this paper a convex MARS modeling algorithm is described. In order to ensure MARS convexity, two major modifications are made: (1) coefficients are constrained, such that pairs of basis functions are guaranteed to jointly form convex functions; (2) the form of interaction terms is altered to eliminate the inherent nonconvexity. Finally, MARS convexity can be achieved by the fact that the sum of convex functions is convex. Convex-MARS is applied to inventory forecasting SDP problems with four and nine dimensions