Optimal Inventory Policies when the Demand Distribution is not Known
AbstractThis paper analyzes the stochastic inventory control problem when the demand distribution is not known. In contrast to previous Bayesian inventory models, this paper adopts a non-parametric Bayesian approach in which the firmâs prior information is characterized by a Dirichlet process prior. This provides considerable freedom in the specification of prior information about demand and it permits the accommodation of fixed order costs. As information on the demand distribution accumulates, optimal history-dependent (s,S) rules are shown to converge to an (s,S) rule that is optimal when the underlying demand distribution is known.
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Bibliographic InfoPaper provided by The A. Gary Anderson Graduate School of Management. University of California Riverside in its series The A. Gary Anderson Graduate School of Management with number 92-12.
Length: 34 pages
Date of creation: 1992
Date of revision:
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Postal: The A. Gary Anderson Graduate School of Management. University of California, Riverside. Riverside CA 92521
Web page: http://www.agsm.ucr.edu/
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demand ; policy making ; investments;
Other versions of this item:
- Larson, C. Erik & Olson, Lars J. & Sharma, Sunil, 2001. "Optimal Inventory Policies when the Demand Distribution Is Not Known," Journal of Economic Theory, Elsevier, vol. 101(1), pages 281-300, November.
- C. Erik Larson Lars J. Olson** and Sunil Sharma***, 1991. "Optimal Inventory Policies When The Demand Distribution Is Not Known#," UCLA Economics Working Papers 631, UCLA Department of Economics.
- Erik W. Larson & Sunil Sharma & Lars J. Olson, 2000. "Optimal Inventory Policies When the Demand Distribution is Not Known," IMF Working Papers 00/183, International Monetary Fund.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Katy S. Azoury & Bruce L. Miller, 1984. "A Comparison of the Optimal Ordering Levels of Bayesian and Non-Bayesian Inventory Models," Management Science, INFORMS, vol. 30(8), pages 993-1003, August.
- Janssen, E. & Strijbosch, L.W.G. & Brekelmans, R.C.M., 2006. "Assessing the Effects of using Demand Parameters Estimates in Inventory Control," Discussion Paper 2006-90, Tilburg University, Center for Economic Research.
- Janssen, Elleke & Strijbosch, Leo & Brekelmans, Ruud, 2009. "Assessing the effects of using demand parameters estimates in inventory control and improving the performance using a correction function," International Journal of Production Economics, Elsevier, vol. 118(1), pages 34-42, March.
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