Chapter 1 AVERAGE COST OPTIMALITY IN INVENTORY MODELS WITH MARKOVIAN DEMANDS AND LOST SALES

@inproceedings{Beyer2004Chapter1A,
  title={Chapter 1 AVERAGE COST OPTIMALITY IN INVENTORY MODELS WITH MARKOVIAN DEMANDS AND LOST SALES},
  author={Dirk Beyer and Suresh P. Sethi},
  year={2004}
}
This paper is concerned with long-run average cost minimization of a stochastic inventory problem with Markovian demand, fixed ordering cost, convex surplus cost, and lost sales. The states of the Markov chain represent different possible states of the environment. Using a vanishing discount approach, a dynamic programming equation and the corresponding verification theorem are established. Finally, the existence of an optimal state-dependent (s, S) policy is proved.