Article ID: | iaor20021098 |
Country: | Netherlands |
Volume: | 132 |
Issue: | 1 |
Start Page Number: | 50 |
End Page Number: | 61 |
Publication Date: | Jul 2001 |
Journal: | European Journal of Operational Research |
Authors: | Ayhan Hayriye, Schlegel Sabine |
Keywords: | markov processes |
We consider the expected value and the tail probability of cumulative shortage and holding cost (i.e. the probability that cumulative cost is more than a certain value) in finite horizon production models. An exact expression is provided for the expected value of the cumulative cost for general production functions. This expression is then used to compute the optimal production rate when the production function is linear. An expansion formula (whose coefficients can be obtained recursively) is provided for the tail probability. Examples are given to illustrate the results.