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A higher-order Markov model for the Newsboy's problem

Author

Listed:
  • W K Ching

    (The University of Hong Kong)

  • E S Fung

    (The University of Hong Kong)

  • M K Ng

    (The University of Hong Kong)

Abstract

Markov models are commonly used in modelling many practical systems such as telecommunication systems, manufacturing systems and inventory systems. However, higher-order Markov models are not commonly used in practice because of their huge number of states and parameters that lead to computational difficulties. In this paper, we propose a higher-order Markov model whose number of states and parameters are linear with respect to the order of the model. We also develop efficient estimation methods for the model parameters. We then apply the model and method to solve the generalised Newsboy's problem. Numerical examples with applications to production planning are given to illustrate the power of our proposed model.

Suggested Citation

  • W K Ching & E S Fung & M K Ng, 2003. "A higher-order Markov model for the Newsboy's problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(3), pages 291-298, March.
    • Handle: RePEc:pal:jorsoc:v:54:y:2003:i:3:d:10.1057_palgrave.jors.2601491
    DOI: 10.1057/palgrave.jors.2601491
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    References listed on IDEAS

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    1. Ching, Wai Ki, 1997. "Markov-modulated Poisson processes for multi-location inventory problems," International Journal of Production Economics, Elsevier, vol. 53(2), pages 217-223, November.
    2. Ishii, Hiroaki & Konno, Tutomu, 1998. "A stochastic inventory problem with fuzzy shortage cost," European Journal of Operational Research, Elsevier, vol. 106(1), pages 90-94, April.
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    Cited by:

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    2. Nikolaos Stavropoulos & Alexandra Papadopoulou & Pavlos Kolias, 2021. "Evaluating the Efficiency of Off-Ball Screens in Elite Basketball Teams via Second-Order Markov Modelling," Mathematics, MDPI, vol. 9(16), pages 1-13, August.

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