Abstract
We consider a stochastic multi-product inventory model with a warehousing constraint with the objective of minimizing the expected long-run average cost. Using the vanishing discount approach, a dynamic programming equation and the corresponding verification result are established. The structure of optimal policies is analyzed when ordering cost of the commodities is linear and the inventory/backlog cost is convex. The optimal policy is shown to be a base-stock policy, in contrast to a modified base-stock policy optimal in the discounted cost version of the problem.
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Dedicated to Alain Haurie on his 60th birthday
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Beyer, D., Sethi, S.P., Sridhar, R. (2002). Average-Cost Optimality of a Base-Stock Policy for a Multi-Product Inventory Model with Limited Storage. In: Zaccour, G. (eds) Decision & Control in Management Science. Advances in Computational Management Science, vol 4. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-3561-1_13
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DOI: https://doi.org/10.1007/978-1-4757-3561-1_13
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