OPERATIONS RESEARCH

Consider the inventory in class problem where the (long-run) expected average cost per week (based on just ordering costs and unsatisfied demand costs) is calculated under the following order policy: that, if there are no cameras in stock, the store orders 3 cameras. However, if there are any cameras in stock, no order is placed. Suppose that the following new order policy is introduced: whenever the number of cameras on hand at the end of the week is 0 or 1, an order is placed that will bring this number up to 3. Otherwise, no order is placed. Recalculate the (long-run) expected average cost per week under this new inventory policy and compare to the previous policy. (Please note out the changes in transition probability matrix).