Dynamic Programming

Mahmut Parlar
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Mahmut Parlar: McMaster University, DeGroote School of Business

Chapter 6 in Interactive Operations Research with Maple, 2000, pp 193-235 from Springer

Abstract: Abstract Dynamic programming (DP) is a simple yet powerful approach for solving certain types of sequential optimization problems. Most real-life decision problems are sequential (dynamic) in nature since a decision made now usually affects future outcomes and payoffs. An important aspect of optimal sequential decisions is the desire to balance present costs with the future costs. A decision made now that minimizes the current cost only without taking into account the future costs may not necessarily be the optimal decision for the complete multiperiod problem. For example, in an inventory control problem it may be optimal to order more than the current period’s demand and incur high inventory carrying costs now in order to lower the costs of potential shortages that may arise in the future. Thus, in sequential problems it may be optimal to have some “short-term pain” for the prospect of “long-term gain.”

Keywords: Gambling Problem; Optimal Policy; Optimal Decision; Employment Level; Optimal Order Quantity (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1007/978-1-4612-1356-7_6

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