Optimal System Allocations with Penalty Costs
CALIFORNIA UNIV BERKELEY OPERATIONS RESEARCH CENTER
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There are N stages to sequentially construct I successful components. At each stage, one allocates a certain amount of money for the construction of a component. If y is the amount allocated, then the component constructed will be a success with probability Py, where P is a continuous nondecreasing function satisfying P0 0. After each component is constructed, one is informed as to whether or not it is successful. If, at the end of the N stages, there are i components short, then a final penalty cost Ci is incurred. The problem is to, at each stage, determine how much money to allocate so as to minimize the total expected cost construction cost plus penalty cost incurred.
- Operations Research
- Manufacturing and Industrial Engineering and Control of Production Systems