Abstract
In this paper, we analyze an optimal impulse control problem of a stochastic inventory system whose state follows a mean-reverting Ornstein-Uhlenbeck process. The objective of the management is to keep the inventory level as close as possible to a given target. When the management intervenes in the system, it requires costs consisting of a quadratic form of the system state. Besides, there are running costs associated with the difference between the inventory level and the target. Those costs are also of a quadratic form. The objective of this paper is to find an optimal control of minimizing the expected total discounted sum of the intervention costs and running costs incurred over the infinite time horizon. We solve the problem by using stochastic impulse control theory.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: Journal of Industrial & Management Optimization
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.