Distributionally Robust Batch Contextual Bandits

Abstract

Policy learning using historical observational data are an important problem that has widespread applications. Examples include selecting offers, prices, or advertisements for consumers; choosing bids in contextual first-price auctions; and selecting medication based on patients’ characteristics. However, existing literature rests on the crucial assumption that the future environment where the learned policy will be deployed is the same as the past environment that has generated the data: an assumption that is often false or too coarse an approximation. In this paper, we lift this assumption and aim to learn a distributionally robust policy with incomplete observational data. We first present a policy evaluation procedure that allows us to assess how well the policy does under worst-case environment shift. We then establish a central limit theorem type guarantee for this proposed policy evaluation scheme. Leveraging this evaluation scheme, we further propose a novel learning algorithm that is able to learn a policy that is robust to adversarial perturbations and unknown covariate shifts with a performance guarantee based on the theory of uniform convergence. Finally, we empirically test the effectiveness of our proposed algorithm in synthetic datasets and demonstrate that it provides the robustness that is missing using standard policy learning algorithms. We conclude the paper by providing a comprehensive application of our methods in the context of a real-world voting data set.This paper was accepted by Hamid Nazerzadeh, data science.Funding: This work was supported by the National Science Foundation [Grant CCF-2106508] and the Air Force Office of Scientific Research [Award FA9550-20-1-0397]. Z. Zhou also gratefully acknowledges the JP Morgan AI Research Grant and the New York University’s Center for Global Economy and Business faculty research grant for support on this work. Additional support is gratefully acknowledged from the National Science Foundation [Grants 1915967 and 2118199].Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4678 .