Math @ Duke

Publications [#330136] of Alessandro Arlotto
Papers Published
 Arlotto, A; Steele, JM, A central limit theorem for costs in Bulinskaya’s inventory management problem when deliveries face delays,
Methodology and Computing in Applied Probability, vol. 20 no. 3
(2018),
pp. 839854 [doi]
(last updated on 2019/02/20)
Abstract: © 2016, Springer Science+Business Media New York. It is common in inventory theory to consider policies that minimize the expected cost of ordering and holding goods or materials. Nevertheless, the realized cost is a random variable, and, as the Saint Petersburg Paradox reminds us, the expected value does not always capture the full economic reality of a decision problem. Here we take the classic inventory model of Bulinskaya (Theory of Probability & Its Applications, 9, 3, 389–403, 1964), and, by proving an appropriate central limit theorem, we show in a reasonably rich (and practical) sense that the meanoptimal policies are economically appropriate. The motivation and the tools are applicable to a large class of Markov decision problems.


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