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arXiv · 2112.14898

Continuity of Discounted Values and the Structure of Optimal Policies for Periodic-Review Inventory Control with Setup Costs

Eugene A. Feinberg·David N. Kraemer
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Abstract

This paper proves continuity of value functions in discounted periodic-review single-commodity total-cost inventory control problems with \revision{continuous inventory levels,} fixed ordering costs, possibly bounded inventory storage capacity, and possibly bounded order sizes for finite and infinite horizons. In each of these constrained models, the finite and infinite-horizon value functions are continuous, there exist deterministic Markov optimal finite-horizon policies, and there exist stationary deterministic Markov optimal infinite-horizon policies. For models with bounded inventory storage and unbounded order sizes, this paper also characterizes the conditions under which $(s_t, S_t)$ policies are optimal in the finite horizon and an $(s,S)$ policy is optimal in the infinite horizon.

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Eugene A. Feinberg, David N. Kraemer. 2021-12-30. Continuity of Discounted Values and the Structure of Optimal Policies for Periodic-Review Inventory Control with Setup Costs. https://arxiv.org/abs/2112.14898

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