Economics Insights @ CBS

We consider a single-item, periodic-review inventory model with uncertain demands in which each period's production volume is limited by a capacity level. The demand distributions, capacity levels, and cost parameters vary according to a periodic pattern. We prove that modified base-stock policies are optimal for the finite-horizon planning model and for both the infinite-horizon discounted and undiscounted cost criterion. We further show that the optimal base-stock levels can be calculated via a simple but efficient value-iteration method.

The paper demonstrates empirically that GAAP earnings have properties to serve as a substitute for dividends in equity valuation analysis. Dividends reduce subsequent GAAP earnings, and "intrinsic" equity prices calculated by forecasting earnings are thus reduced by current dividends. This is in accordance with the Miller and Modigliani principle—the displacement property—which states that the payment of dividends reduces prices, dollar for dollar.

We propose using a modification of the simple peak hour approximation (SPHA) for estimating peak congestion in multiserver queueing systems with exponential service times and time-varying periodic Poisson arrivals. This lagged pointwise stationary approximation (lagged PSA) is obtained by first estimating the time for the actual peak congestion by the time of peak congestion in an infinite server model and then substituting the arrival rate at this tiem int he corresponding stationary finite server model.