A diffusion inventory model for deteriorating items (Q1406113)

The authors consider the problem of finding the optimal impulse control schedule for a stochastic inventory model for deteriorating items. It is shown that this problem can be studied in the general frame of parabolic quasi variational inequalities. As a special case, they use this approach to solve the second-order obstacle problem. Some background material is also provided. It is a nice paper with interesting results. Such type quasi variational inequalities are being used to study the risk analysis in finance.