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An Analysis of the Control-Algorithm Re-solving Issue in Inventory and Revenue Management.
- Source :
- M&SOM: Manufacturing & Service Operations Management; Summer2008, Vol. 10 Issue 3, p468-483, 16p, 1 Diagram, 1 Chart
- Publication Year :
- 2008
-
Abstract
- While inventory- and revenue-management problems can be represented as Markov decision process (MDP) models, in some cases the well-known dynamic-programming curse of dimensionality makes it computationally prohibitive to solve them exactly. An alternative solution, called here the control-algorithm approach, is to use a math program (MP) to approximately represent the MDP and use its optimal solution to heuristically instantiate the parameters of the decision rules of a given set of control policies. As new information is observed over time, the control algorithm can incorporate it by re-solving the MP and revising the parameters of the decision rules with the newly obtained solution. The re-solving issue arises when one reflects on the consequences of this revision: Does the performance of the control algorithm really improve by revising its decision-rule instantiation with the solution of the re-solved MP, or should an appropriate modification of the prior solution be used? This paper analyzes the control-algorithm re-solving issue for a class of finite-horizon inventory- and revenue-management problems. It establishes sufficient conditions under which re-solving does not deteriorate the performance of a control algorithm, and it applies these results to control algorithms for network revenue management and multiproduct make-to-order production with lost sales and positive lead time. [ABSTRACT FROM AUTHOR]
- Subjects :
- ALGORITHMS
MANAGEMENT
INVENTORIES
REVENUE management
MARKOV processes
RATE of return
Subjects
Details
- Language :
- English
- ISSN :
- 15234614
- Volume :
- 10
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- M&SOM: Manufacturing & Service Operations Management
- Publication Type :
- Academic Journal
- Accession number :
- 33116642
- Full Text :
- https://doi.org/10.1287/msom.1070.0184