Optimal control of price and production in an assemble-to-order system |
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| Authors: | Youyi Feng Jihong Ou Zhan Pang |
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| Institution: | aThe Chinese University of Hong Kong, Sha Tin, N.T., Hong Kong, China;bCheung Kong Graduate School of Business, China |
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| Abstract: | We study the optimal control of an assembly system that produces one assembled-to-order final product with multiple made-to-stock components and sells it at variable price. It is shown that a threshold control on component production, product price, and product orders maximizes total discounted profit over an infinite horizon. |
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| Keywords: | Assemble-to-order system Pricing Markov decision process |
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