Consider an RMAB instance with $N$ arms, where each arm $i \in [N]$ has a finite state space $\mathbb S_i$ and can receive an action $y_i^t \in {0, 1}$ (representing not pulling or pulling the arm, respectively) at each time step $t$. The state of arm $i$ at time $t$ is denoted by $s_i^t$. Depending on the action taken, a reward $r_i(s_i^t, y_i^t)$ is accrued. As a decision maker, our objective is to maximize the averaged total reward over an infinite time horizon, under a constraint that only $B$ arms can be pulled at any time step. This setup can be formalized as follows: $$ \max_{\pi::\mathbb S \to Y} \lim_{T \to \infty} \frac{1}{T} \mathbb{E} [\sum_{t = 1}^T \sum_{i\in [N]} r_i(s_i^t, y_i^t)]\ \text{s.t. } \sum_{i\in [N]} y_i^t \le B, \forall t $$ Consider a relaxed version where the ‘hard’ budget constraint is averaged over time: $$ \max_{\pi::\mathbb S \to Y} \lim_{T \to \infty} \frac{1}{T} \mathbb{E} [\sum_{t = 1}^T \sum_{i\in [N]} r_i(s_i^t, y_i^t)]\ \text{s.t. } \frac1T\mathbb E[\sum_{i\in [N]} y_i^t ]\le B $$ Let $\lambda$ be the Lagrangian multiplier for the relaxed budget constraint $\frac1T\mathbb E[\sum_{i\in [N]} y_i^t ]\le B$. The duality transforms into the following $$ \min_{\lambda} \max_{\pi::\mathbb S \to Y} \lim_{T \to \infty} \frac{1}{T} \left( \mathbb{E} \left[\sum_{t=1}^T \sum_{i \in [N]} r_i(s_i^t, y_i^t)\right] - \lambda \left(\mathbb{E} \left[\sum_{t=1}^T \sum_{i \in [N]} y_i^t\right] - TB\right) \right) $$ Notice that we can decouple the above optimization problem for every arm, by leaving out the budget constraint on the outside: $$ \begin{align} & \lim_{T \to \infty} \frac{1}{T} \left( \mathbb{E} \left[\sum_{t=1}^T \sum_{i \in [N]} r_i(s_i^t, y_i^t)\right] - \lambda \left(\mathbb{E} \left[\sum_{t=1}^T \sum_{i \in [N]} y_i^t\right] - TB\right) \right)\cr = & \lim_{T \to \infty} \frac{1}{T}\left(\sum_{i\in [N]} \left( \mathbb{E} \left[\sum_{t=1}^T r_i(s_i^t, y_i^t)\right] - \lambda \mathbb{E} \left[\sum_{t=1}^T y_i^t\right]\right) - \lambda TB\right) \end{align} $$ So, for each $i$, consider the inner maximization. $$ \max_{\pi::\mathbb S_i \to Y_i} \left(\lim_{T \to \infty} \frac{1}{T} \left( \mathbb{E} \left[\sum_{t=1}^T r_i(s_i^t, y_i^t)\right] - \lambda \left(\mathbb{E} \left[\sum_{t=1}^T y_i^t\right] - TB_i\right) \right)\right) $$ Notice that, the last term $\lambda TB$ can be dropped for each individual $i$ because it’s irrelevant with the inner maximization. Let: $$ \phi_i(\lambda) :=\max_{\pi::\mathbb S_i \to Y_i}\left(\lim_{T \to \infty} \frac{1}{T} \left( \mathbb{E} \left[\sum_{t=1}^T r_i(s_i^t, y_i^t)\right] - \lambda \mathbb{E} \left[\sum_{t=1}^T y_i^t\right] \right)\right) $$ The Lagrangian multiplier here now has an economic intepretation – the price charged for pulling the arm. Consider the optimal stationay policy $\pi_i^*$ for the above optimization problem. Define an arm $i$’s indexability:

Definition (Indexability)

An arm $i$ is said to be indexable if it meets the following criteria based on the optimization of a stationary policy $\pi^*_{i}(\lambda)$ which maps the state space $\mathbb S_i$ to actions $[0, 1]$.

This policy is determined by maximizing the long-term average expected reward minus a penalty for action, formulated as: $$ \phi_i(\lambda) :=\max_{\pi::\mathbb S_i \to Y_i}\left(\lim_{T \to \infty} \frac{1}{T} \left( \mathbb{E} \left[\sum_{t=1}^T r_i(s_i^t, y_i^t)\right] - \lambda \mathbb{E} \left[\sum_{t=1}^T y_i^t\right] \right)\right) $$ Define the active set under a penalty $\lambda$ as: $$ \mathcal P_i(\lambda) :=(s\in \mathbb S_i: \pi_i^(\lambda)(s_i) = 1) $$ where $\mathcal{P}_i(\lambda)$ is the set of states for which the optimal policy $\pi_i^(\lambda)$ chooses to activate (pull) the arm.

For indexability to hold, the active set must satisfy the inclusion relationship: $$ \mathcal P_i(\lambda_1)\subseteq \mathcal P_i(\lambda_2), \text{for all }\lambda_2 \le \lambda_1 $$

If for an RMAB problem instance, all arms are indexable, the preceding Lagrangian relaxation followed by decoupling allows us to solve for an index for every state $s_i$ of arm $i$: $$ w_i(s_i):=\inf_{\lambda}[\lambda: s_i\in \mathcal P_i(\lambda)]. $$ Back to the optimization problem, that the decision maker sought pull $N$ arms, and maximizes aggregate reward subject to a budget constraint: $$ \max_{\pi::\mathbb S \to Y} \lim_{T \to \infty} \frac{1}{T} \mathbb{E} [\sum_{t = 1}^T \sum_{i\in [N]} r_i(s_i^t, y_i^t)] \quad\text{s.t. } \frac1T\mathbb E[\sum_{i\in [N]} y_i^t ]\le B\ $$ In his seminal work, Whittle proved that the solution for the above optimzation is equivalent to $$ \min_\lambda \sum_{i\in [N]}\phi_i(\lambda) - \lambda TB. $$ And, from the Lagrangian construction process, we know that the optimal policy is obtained for every arm $i$ independently. Denote the optimal solution as $$ \lambda^\star(B) := \arg\min_\lambda \sum_{i\in [N]}\phi_i(\lambda) - \lambda TB. $$ The optimal policy takes the following form: we simply pull an arm $i$ iff. $w_i(s_i)\ge \lambda^\star$. The budget constraint $\mathbb E\sum_t \sum_{i\in [N]}y_i^t\le TB$ is automatically satisfied in the long run in an average sense.