Dynamic inventory management under debt financing

Jianjun Deng, Lian Qi, Zhen Liu

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

In this paper, we study a dynamic inventory optimal control problem in a finite planning horizon with the consideration of debt financing and tax, which are two important factors that influence inventory decisions. The retailer, who raises funds from the financial market at the beginning of the planning horizon and pays off the debt at the end of the horizon, replenishes its stock under the constraint of its cash flow over each period of the planning horizon. The retailer faces random demand and the unmet demand in each period is lost. We assume tax losses are not allowed for tax carrybacks or carry-forwards. We determine the optimal ordering policy at the retailer to maximize the expected terminal wealth at the end of the planning horizon. Finally, we will find out the optimal inventory policy and the optimal debt financing decision with the capital constraint and the effect of tax.

Original languageEnglish (US)
Title of host publication31st Annual National Conference of the American Society for Engineering Management 2010, ASEM 2010
Pages281-285
Number of pages5
StatePublished - 2010
Event31st Annual National Conference of the American Society for Engineering Management 2010, ASEM 2010 - Fayetteville, AR, United States
Duration: Oct 13 2010Oct 16 2010

Publication series

Name31st Annual National Conference of the American Society for Engineering Management 2010, ASEM 2010

Conference

Conference31st Annual National Conference of the American Society for Engineering Management 2010, ASEM 2010
Country/TerritoryUnited States
CityFayetteville, AR
Period10/13/1010/16/10

All Science Journal Classification (ASJC) codes

  • Organizational Behavior and Human Resource Management

Keywords

  • Debt financing
  • Dynamic inventory
  • Financial constraints

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