Economics Insights @ CBS

The reorder point/reorder quantity policies, also referred to as (r, Q) policies, are widely used in industry and extensively studied in the literature. However, for a period of almost 30 years there has been no efficient algorithm for computing optimal control parameteres for such policies. In this paper, we present a surprisingly simple and efficient algorithm for the determination of an optimal (r*, Q*) policy. The computational complexity of the algorithm is linear in Q*.

Countable-state, continuous-time Markov chains are often analyzed through simulation when simple analytical expressions are unavailable. Simulation is typically used to estimate costs or performance measures associated with the chain and also characteristics like state probabilities and mean passage times. Here we consider the problem of estimating derivatives of these types of quantities with respect to a parameter of the process. In particular, we consider the case where some or all transition rates depend on a parameter.

This article explores the differential measurement problems related to the earnings components by invoking the standard errors-in-variables perspective on estimated coefficients. A more traditional way of looking at accounting recognizes the process as one of measurements. That is, the analysis of transactions leads to line items in the financial statements, which in turn aggregate into the bottom line numbers: earnings and book value. The disclosures of the line items clearly suggest that the accountant is aware of the insufficiency of earnings and book values as determinants of values.