Optimal Control of Brownian Inventory Models with Convex Holding Cost Average Cost Case(11年文章).pdfVIP

Optimal Control of Brownian Inventory Models with Convex Holding Cost: Average Cost Case ∗ 1 † ‡ 1 J. G. Dai and Dacheng Yao 0 2 October 14, 2011 t c O 6 Abstract 1 We consider an inventory system in which inventory level fluctuates as a Brownian ] C motion in the absence of control. The inventory continuously accumulates cost at a O rate that is a general convex function of the inventory level, which can be negative . when there is a backlog. At any time, the inventory level can be adjusted by a positive h or negative amount, which incurs a fixed cost and a proportional cost. The challenge t a is to find an adjustment policy that balances the holding cost and adjustment cost to m minimize the long-run average cost. When both upward and downward fixed costs are [ positive, our model is an impulse control problem. When both fixed costs are zero, our model is a singular or instantaneous control problem. For the impulse control 2 problem, we prove that a four-parameter control band policy is optimal among all v 1 feasible policies. For the singular control problem, we prove that a two-parameter 3 control band policy is optimal. 8 We use a lower-bound approach, widely known as “the verification theorem”, to 2 prove the optimality of a control band policy for both the impulse and singular