Impulse control with discontinuous setup costs: discounted cost criterion

DOI10.1137/19M1299244zbMATH Open1455.90017arXiv1911.05308OpenAlexW3120005744MaRDI QIDQ5145605FDOQ5145605

Fen Xu, Dacheng Yao, Hanqin Zhang

Publication date: 21 January 2021

Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)

Abstract: This paper studies a continuous-review backlogged inventory model considered by Helmes et al. (2015) but with discontinuous quantity-dependent setup cost for each order. In particular, the setup cost is characterized by a two-step function and a higher cost would be charged once the order quantity exceeds a threshold $Q$. Unlike the optimality of $(s,S)$-type policy obtained by Helmes et al. (2015) for continuous setup cost with the discounted cost criterion, we find that, in our model, although some $(s,S)$-type policy is indeed optimal in some cases, the $(s,S)$-type policy can not always be optimal. In particular, we show that there exist cases in which an $(s,S)$ policy is optimal for some initial levels but it is strictly worse than a generalized $(s,S(x):xleqs)$ policy for the other initial levels. Under $(s,S(x):xleqs)$ policy, it orders nothing for $x>s$ and orders up to level $S(x)$ for $xleqs$, where $S(x)$ is a non-constant function of $x$. We further prove the optimality of such $(s,S(x):xleqs)$ policy in a large subset of admissible policies for those initial levels. Moreover, the optimality is obtained through establishing a more general lower bound theorem which will also be applicable in solving some other optimization problems by the common lower bound approach.

Full work available at URL: https://arxiv.org/abs/1911.05308

Recommendations

• A measure approach for continuous inventory models: discounted cost criterion
• On the Optimality of $(s,S)$-Policies in Continuous Review Inventory Models
• Optimal Control Policy for Stochastic Inventory Systems with Markovian Discount Opportunities
• Structure of optimal policies to periodic-review inventory models with convex costs and backorders for all values of discount factors
• A Solvable One-Dimensional Model of a Diffusion Inventory System

zbMATH Keywords

\((s,S)\) policyinventoryimpulse control\((s,S(x):x\leq s)\) policyquantity-dependent setup cost

Mathematics Subject Classification ID

Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.) (60J70) Impulsive optimal control problems (49N25) Inventory, storage, reservoirs (90B05) Optimal stochastic control (93E20)

Cites Work

• Stochastic differential equations. An introduction with applications.
• Title not available (Why is that?)
• Title not available (Why is that?)
• Optimal Control of a Brownian Production/Inventory System with Average Cost Criterion
• Impulse Control of Brownian Motion
• Optimal Control of a Mean-Reverting Inventory
• Optimality of an $(s, S)$ Policy with Compound Poisson and Diffusion Demands: A Quasi-variational Inequalities Approach
• A Solvable One-Dimensional Model of a Diffusion Inventory System
• Optimal Control of Brownian Inventory Models with Convex Inventory Cost: Discounted Cost Case
• A continuous time inventory model
• On the Opimality of $( {s,S} )$ Inventory Policies: New Conditions and a New Proof
• Title not available (Why is that?)
• On a stochastic inventory model with a generalized holding costs
• Ordering Policies for Periodic-Review Inventory Systems with Quantity-Dependent Fixed Costs
• Optimal Policy for a Periodic-Review Inventory System Under a Supply Capacity Contract
• Optimal Inventory Policy with Subadditive Ordering Costs and Stochastic Demands
• Impulse Control of Multidimensional Jump Diffusions
• Optimality of an $(s,S)$ Policy with Compound Poisson and Diffusion Demands: A Quasi-Variational Inequalities Approach
• Inventory Control for Spectrally Positive Lévy Demand Processes
• Optimal Ordering Policy for Inventory Systems with Quantity-Dependent Setup Costs
• Impulse Control of Brownian Motion: The Constrained Average Cost Case
• Optimal control policy for a Brownian inventory system with concave ordering cost
• Nonlinear programming
• A Measure Approach for Continuous Inventory Models: Discounted Cost Criterion
• Brownian Models of Performance and Control
• Optimal Policies for Brownian Inventory Systems With a Piecewise Linear Ordering Cost
• Continuous inventory models of diffusion type: long-term average cost criterion
• A weak convergence approach to inventory control using a long-term average criterion
• Optimal Inventory Control with Jump Diffusion and Nonlinear Dynamics in the Demand

This page was built for publication: Impulse control with discontinuous setup costs: discounted cost criterion

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q5145605)