Question: Consider a harbor with a single dock for unloading ships. The ships arrive according to a Poisson process at a mean rate of ships
Suppose that the expected cost per unit time of running the unloading dock is Dμ. The waiting cost for each idle ship is some constant (C) times the square of the total waiting time (including loading time). The shipping company wishes to adjust μ so that the expected total cost (including the waiting cost for idle ships) per unit time is minimized. Derive this optimal value of μ in terms of D and C.
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So ETC is strictly convex ... View full answer
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