A stochastic card balance management problem with continuous and batch-type bilateral transactions

Yonit Barron

Operations Research Perspectives, 2023, vol. 10, issue C

Abstract: We study a stochastic continuous-review card balance management problem with two transaction patterns, namely, continuous and batch-type bilateral transactions, both in a Markovian environment. Motivated by the Autoload program used in public transit systems, the card is managed using a two-parameter band policy. Our cost structure includes activation and loading costs, and a fine for a negative balance. By applying hitting time theory and martingales, we derive the cost functionals and obtain, numerically, the optimal thresholds minimizing the expected discounted total cost. Surprisingly, a numerical study shows that the optimal policy is inherently linked with the outflow patterns, and is more sensitive to changes in withdrawal rates than to changes in batch sizes. We further show that timing is a significant factor in determining the policy: a high discount factor leads to frequent activations with smaller amounts.

Keywords: Cash management; MAP process; Band policy; Phase-type distribution; Bilateral jumps (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S221471602300009X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:oprepe:v:10:y:2023:i:c:s221471602300009x

DOI: 10.1016/j.orp.2023.100274

Access Statistics for this article

Operations Research Perspectives is currently edited by Rubén Ruiz Garcia

More articles in Operations Research Perspectives from Elsevier
Bibliographic data for series maintained by Catherine Liu ().