Dynamic Inventory Control with Satisfaction-Dependent Demand

Justin Azadivar, Max Shen and Jevaveerasingam Shanthikumar

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: In this paper, we consider the discrete multiperiod newsvendor dynamic inventory control problem where customers follow a simple satisfaction-based demand process, where their probability of demand depends on whether their demand was satis ed the last time they demanded a product, and observe the differences between optimal policies and myopic policies which do not directly consider how inventory policies can affect future demand. We con rm the intuitive result that inventory managers should tend to order more than the myopic policy when satis ed customers are more likely to demand product, and less than the myopic policy when satis ed customers are less likely to demand. Moreover, we and that, when choosing a fixed order policy, even an empirically myopic solution with perfect demand distribution information will move away from the optimum towards a suboptimal solution.

Pages: 22 pages
Date: 2010-08
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://business.purdue.edu/research/Working-papers-series/2010/1249.pdf (application/pdf)

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:pur:prukra:1249

Access Statistics for this paper

More papers in Purdue University Economics Working Papers from Purdue University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Business PHD ().