Stochastic allocation of a resource among partially interchangeable activities

This paper examines the problem of allocating an available amount of a particular resource among partially interchangeable activities, when the demands for the activities are strongly correlated continuous random variables. The problem is formulated as a stochastic program with complete recourse and it is reduced to a deterministic convex allocation problem through parametric programming. A general solution procedure is proposed. An important application of the problem studied deals with the allocation of the budget of a nursing unit in a hospital to registered nurses, licenced practical nurses and aides. The case of three activities is therefore studied in detail to obtain a solution algorithm as efficient as possible.