Question: ( 2 0 points ) Consider a discrete time periodic inventory model and let n be the total demand in period n and let x

(20 points) Consider a discrete time periodic inventory model and let n be the total demand in period n and let xn be the inventory quantity on hand at the end of period n. Assume that (s,S) inventory policy is used. That is, if the end of period stock is not greater than s, then a quantity is immediately procured to bring the level up to S. If the end of period stock exceeds s, then no replenishment takes place. Suppose that s=2 and S=4 and 1,2,dots,n are independent random variables where
P(i=0)=0.1,P(i=1)=0.4 and P(i=2)=0.5 for i=1,2,3,dots,n
Then x0,x1,dots,xn is a Markov Chain.
First define states of the Markov chain then determine the transition probability matrix of the chain.
 (20 points) Consider a discrete time periodic inventory model and let

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