A Comparison of the Optimal Ordering Levels of Bayesian and Non-Bayesian Inventory Models

Katy S. Azoury and Bruce L. Miller
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Katy S. Azoury: School of Business Administration and Economics, California State University, Northridge, California 91330
Bruce L. Miller: System Science Department, University of California, Los Angeles, California 90024

Management Science, 1984, vol. 30, issue 8, 993-1003

Abstract: Although it is often the case that the parameters of the distribution of demand are not known with certainty and that a Bayesian formulation would be appropriate, such an approach is generally not used in inventory calculations for computational reasons. Since one often resorts to a non-Bayesian formulation, it is of interest to compare Bayesian policies with a comparable non-Bayesian policy. Using the concept of flexibility it was anticipated that the quantity ordered under the non-Bayesian policy would be greater than or equal to that under a Bayesian policy. This result is established for the n-period nondepletive inventory model. However, a two-period counterexample is given for the standard (depletive) inventory model.

Keywords: spare parts; Bayesian; dynamic programming (search for similar items in EconPapers)
Date: 1984
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Citations: View citations in EconPapers (16)

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