The optimal ordering policy for a short-life-cycle product under Bayesian updating

Abstract

This paper deals with the ordering decision question on ordering for a short-life-cycle product under Bayesian updating. According to the product, which is characterized by the single cycle and two selling periods, we depict the ordering decision for a centralized system with a stochastic dynamic programming model, and prove that the expected profit function of the whole system is concave on the first ordering quantity and the remedial ordering quantity. Then, we develop the optimal ordering policy for the centralized system. Lastly, we analyze the characteristics of the decision method with some examples.