Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 1951, Volume 19, Issue 3

Optimal Inventory Policy<250:OIP>2.0.CO;2-R
p. 250-272

Jacob Marschak, Kenneth J. Arrow, Theodore Harris

Optimal inventory policy is first derived for a simple model in which the future (and constant) demand flow and other relevant quantities are known in advance. This is followed by the study of uncertainty models--a static and a dynamic one--in which the demand flow is a random variable with a known probability distribution. The best maximum stock and the best reordering point are determined as functions of the demand distribution, the cost of making an order, and the penalty of stock depletion.

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