Uncertainty Quantification in Data-Driven Inverse Optimization via Bayesian Inference

Abstract: Inverse optimization (IO) is used to estimate unknown parameters of an optimization model from observed decisions. In the data-driven context, the estimated parameters are inherently uncertain, yet quantifying this uncertainty has received limited attention in the literature, where existing methods return a point estimate. In this paper, we propose a hierarchical Bayesian framework for parameter uncertainty quantification in data-driven inverse optimization. Considering two data-generating processes, we develop two Markov chain Monte Carlo algorithms to estimate the posterior distribution of the unknown parameter vector, which is used to construct credible regions. We establish posterior consistency under standard identifiability conditions. Numerical experiments demonstrate near-nominal empirical coverage of the credible regions and show that the regions shrink as the number of observed decisions increases.