Optimal Inventory Decisions in a Multi-period News Vendor Problem with Partially Observed Markovian Supply Capacities
European Journal of Operational Research, Forthcoming
34 Pages Posted: 2 Jun 2008 Last revised: 10 Jul 2009
Date Written: June 2, 2008
This paper considers a multi-period news-vendor problem with partially observed supply-capacity information which evolves as a Markovian Process. The supply capacity is fully observed by the buyer when the capacity is smaller than the buyer's ordering quantity. Otherwise, the buyer knows that the current-period supply capacity is greater than its ordering quantity. Based on these two observations, the buyer updates the future supply-capacity forecasting accordingly. With a dynamic programming formulation, we prove the existence of an optimal ordering policy. We also prove that the optimal order quantity is greater than the myopic order quantity.
Keywords: Partial information, Markovian process, inventory planning and control
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