Optimal Pricing and Production Control in an Assembly System With a General Stockout Cost

@article{Keblis2012OptimalPA,
  title={Optimal Pricing and Production Control in an Assembly System With a General Stockout Cost},
  author={Matthew F. Keblis and Youyi Feng},
  journal={IEEE Transactions on Automatic Control},
  year={2012},
  volume={57},
  pages={1821-1826}
}
We study the optimal control of an assembly system used to produce an assemble-to-order end product. We determine how to manage component production and end product price in order to maximize total discounted profit over an infinite horizon. We show the optimal production control is a state dependent base-stock policy and the optimal price adjustment is given by a threshold switching policy. 

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