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A Comparison of the Optimal Ordering Levels of Bayesian and Non-Bayesian Inventory Models

  • Katy S. Azoury

    (School of Business Administration and Economics, California State University, Northridge, California 91330)

  • Bruce L. Miller

    (System Science Department, University of California, Los Angeles, California 90024)

Registered author(s):

    Although it is often the case that the parameters of the distribution of demand are not known with certainty and that a Bayesian formulation would be appropriate, such an approach is generally not used in inventory calculations for computational reasons. Since one often resorts to a non-Bayesian formulation, it is of interest to compare Bayesian policies with a comparable non-Bayesian policy. Using the concept of flexibility it was anticipated that the quantity ordered under the non-Bayesian policy would be greater than or equal to that under a Bayesian policy. This result is established for the n-period nondepletive inventory model. However, a two-period counterexample is given for the standard (depletive) inventory model.

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    File URL: http://dx.doi.org/10.1287/mnsc.30.8.993
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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 30 (1984)
    Issue (Month): 8 (August)
    Pages: 993-1003

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    Handle: RePEc:inm:ormnsc:v:30:y:1984:i:8:p:993-1003
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