Title

Optimal Inventory Policies When Sales Are Discretionary

Document Type

Discussion Paper

Publication Date

8-1-2000

CFDP Number

1270

CFDP Pages

10

Abstract

Inventory models customarily assume that demand is fully satisfied if sufficient stock is available. We analyze the form of the optimal inventory policy if the inventory manager can choose to meet a fraction of the demand. Under classical conditions we show that the optimal policy is again of the ( S,s ) form. The analysis makes use of a novel property of K-concave functions.

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