Average Cost Models with Backorders

Dirk Beyer (), Feng Cheng (), Suresh Sethi and Michael Taksar ()
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Dirk Beyer: M-Factor
Feng Cheng: Office of Performance Analysis and Strategy
Michael Taksar: University of Missouri

Chapter Chapter 5 in Markovian Demand Inventory Models, 2010, pp 83-106 from Springer

Abstract: Abstract This chapter is devoted to the study of a stochastic inventory problem with Markovian demand and fixed cost from the viewpoint of minimizing the long-run average cost of inventory/backlog and ordering. The purpose is to establish the dynamic programming equation or average cost optimality equation for the problem, prove the existence of an optimal feedback (or Markov) policy, and show that a feedback policy of (s, S)-type is optimal.

Date: 2010
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DOI: 10.1007/978-0-387-71604-6_5

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