Constrained service reliability under stochastic demand

Boronico considers the determination of ex ante service reliability in a price-taking, expected-profit-maximizing enterprise that must respect an expected-service–quality constraint in the face of stochastic demand. The constrained service–reliability issue, however, is much more complex than his analysis reveals. That complexity comes to light once one recognizes the additional need to consider the curvature of the underlying functions and the demands imposed upon that curvature by the second-order conditions for a constrained maximum. The introduction of uncertainty into the picture only adds to the issue's complexity and further complicates the problem of drawing unambiguous inferences.