Optimality of (s, S) Policies in the Infinite Horizon Dynamic Inventory Problem

Donald L. Iglehart
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Donald L. Iglehart: Oxford University

Management Science, 1963, vol. 9, issue 2, 259-267

Abstract: The optimal ordering policy for a n-period dynamic inventory problem in which the ordering cost is linear plus a fixed reorder cost and the other one-period costs are convex is characterized by a pair of critical numbers, (s n , S n ); see Scarf, [4]. In this paper we give bounds for the sequences {s n } and {S n } and discuss their limiting behavior. The limiting (s, S) policy characterizes the optimal ordering policy for the infinite horizon problem. Similar results are obtained if there is a time-lag in delivery.

Date: 1963
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