Skip to content
Q21Section A (Section A)21 of 60

Optimal inventory under exponential demand

In a store, the daily demand for milk (in litres) is a random variable having Exp(λ)\mathrm{Exp}(\lambda) distribution, where λ>0\lambda > 0. At the beginning of the day, the store purchases c(>0)c (> 0) litres of milk at a fixed price b(>0)b (> 0) per litre. The milk is then sold to the customers at a fixed price s(>b)s (> b) per litre. At the end of the day, the unsold milk is discarded. Then the value of cc that maximizes the expected net profit for the store equals

Options

Pick an option to check your answer.