Summary and Concluding Remarks
Starting point of our investigations of a linear policy approach to inventory-production models was the linear-quadratic theory presented in Chapter 2. These models are characterized by the linearity of their plant and feedback equations and by the assumption of a quadratic performance criterion. One of the outstanding properties of linear-quadratic models is the small amount of information being required. Due to the validity of the principle of dynamic certainty equivalence total stochastics of the additive inviroment (sequence of demand) can be reduced to conditional mean forecasts without any loss of optimality. This property has been exploited by Holt et. al. in their work on production smoothing and work-force planning.
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