TY - JOUR
T1 - Optimality of (s; S) policies with nonlinear processes
AU - Liu, Jingzhen
AU - Yiu, Ka Fai Cedric
AU - Bensoussan, Alain
PY - 2017/1/1
Y1 - 2017/1/1
N2 - It is observed empirically that mean-reverting processes are more realistic in modeling the inventory level of a company. In a typical mean- reverting process, the inventory level is assumed to be linearly dependent on the deviation of the inventory level from the long-term mean. However, when the deviation is large, it is reasonable to assume that the company might want to increase the intensity of interference to the inventory level significantly rather than in a linear manner. In this paper, we attempt to model inventory replenishment as a nonlinear continuous feedback process. We study both infinite horizon discounted cost and the long-run average cost, and derive the corresponding optimal (s; S) policy.
AB - It is observed empirically that mean-reverting processes are more realistic in modeling the inventory level of a company. In a typical mean- reverting process, the inventory level is assumed to be linearly dependent on the deviation of the inventory level from the long-term mean. However, when the deviation is large, it is reasonable to assume that the company might want to increase the intensity of interference to the inventory level significantly rather than in a linear manner. In this paper, we attempt to model inventory replenishment as a nonlinear continuous feedback process. We study both infinite horizon discounted cost and the long-run average cost, and derive the corresponding optimal (s; S) policy.
KW - (s,S) policy
KW - Inventory control
KW - Nonlinear mean-reverting process
UR - http://www.scopus.com/inward/record.url?scp=85008645152&partnerID=8YFLogxK
UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85008645152&origin=recordpage
U2 - 10.3934/dcdsb.2017008
DO - 10.3934/dcdsb.2017008
M3 - 21_Publication in refereed journal
VL - 22
SP - 161
EP - 185
JO - Discrete and Continuous Dynamical Systems - Series B
JF - Discrete and Continuous Dynamical Systems - Series B
SN - 1531-3492
IS - 1
ER -