Before revision:  In this paper we propose a hybrid functional-form based approach that combines the strengths of the analytical and simulation-based approaches into a novel iterative algorithm. We do this by locally approximating the objective function through a functional form calibrated using simulation. In each iteration step we choose a new resource allocation based on this local approximation, which in turn gives rise to a new approximation. We implement this algorithm for a range of functional forms, computationally determine which work best, and provide an alternative formulation of the algorithm that does not rely on numerical solvers. Extensive experiments show that our functional-form approach has significantly lower computational costs compared to stochastic approximation.
After revision:  In this paper we propose a hybrid functional-form based approach that combines the strengths of the analytical and simulation-based optimisation. The key insight is to replace the computationally expensive gradient estimation in simulation optimisation with a closed-form analytical approximation that is calibrated using a single simulation run. We develop two implementations of this approach and conduct extensive computational experiments on complex examples to show that it is capable of substantially improving system performance. We also provide evidence that our approach has substantially lower computational costs compared to stochastic approximation.