Asymptotic Analysis for Data-Driven Inventory Policies

arXiv2008.08275MaRDI QIDQ6347345FDOQ6347345

Authors: Xun Zhang, Zhi-Sheng Ye, William B. Haskell 

Publication date: 19 August 2020

Abstract: We study periodic review stochastic inventory control in the data-driven setting where the retailer makes ordering decisions based only on historical demand observations without any knowledge of the probability distribution of the demand. Since an (s, S)-policy is optimal when the demand distribution is known, we investigate the statistical properties of the data-driven (s, S)-policy obtained by recursively computing the empirical cost-to-go functions. This policy is inherently challenging to analyze because the recursion induces propagation of the estimation error backwards in time. In this work, we establish the asymptotic properties of this data-driven policy by fully accounting for the error propagation. First, we rigorously show the consistency of the estimated parameters by filling in some gaps (due to unaccounted error propagation) in the existing studies. In this setting, empirical process theory (EPT) cannot be directly applied to show asymptotic normality. To explain, the empirical cost-to-go functions for the estimated parameters are not i.i.d. sums due to the error propagation. Our main methodological innovation comes from an asymptotic representation for multi-sample U-processes in terms of i.i.d. sums. This representation enables us to apply EPT to derive the influence functions of the estimated parameters and to establish joint asymptotic normality. Based on these results, we also propose an entirely data-driven estimator of the optimal expected cost and we derive its asymptotic distribution. We demonstrate some useful applications of our asymptotic results, including sample size determination and interval estimation. The results from our numerical simulations conform to our theoretical analysis.lations conform to our theoretical analysis.

This page was built for publication: Asymptotic Analysis for Data-Driven Inventory Policies

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6347345)