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Demand evolution in stochastic inventory systems: Riskiness increase

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  • Li, Xiaoming

Abstract

This paper characterizes demand evolution in the steady state under common inventory policies in a single-location stochastic inventory system. Our results show that downstream demand nonstrictly second-degree stochastically dominates upstream orders and the bullwhip effect occurs. We provide the link between demand evolution and utility theory for stochastic inventory systems. Our model is general in that ultimate customer demand follows an arbitrary stationary distribution and the facility may arbitrarily select policy parameters.

Suggested Citation

  • Li, Xiaoming, 2008. "Demand evolution in stochastic inventory systems: Riskiness increase," International Journal of Production Economics, Elsevier, vol. 116(2), pages 182-189, December.
  • Handle: RePEc:eee:proeco:v:116:y:2008:i:2:p:182-189
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    References listed on IDEAS

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    Cited by:

    1. Li, Xiaoming, 2010. "Optimal inventory policies in decentralized supply chains," International Journal of Production Economics, Elsevier, vol. 128(1), pages 303-309, November.

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