Elements of Numerical Mathematical Economics with Excel

10.7. Inventory optimization

Let us go back to the inventory problem presented in Section 9.9.

The problem was that of a firm receiving an order for B units of product to be delivered by time T, seeking an optimal production schedule for filling the order at the specified delivery date at minimum cost.

The CoV problems was formalized as follows:

min J ( y ) = ∫ 0 T [ c 1 y ’ ( t ) 2 + c 2 y ( t ) ] d t

s . t . y ( 0 ) = 0 and y ( T ) = B with y ’ ( t ) ≥ 0

The firm's objective is ...