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Unformatted text preview: V n ( x,s ) = max y ≥ x { R · E [ miny,D n ] + (1 + r 1 )( sW ( yx )) +(1 + r 2 )( W ( yx )s ) +W ( yx ) + 1 1 + r 1 · V n +1 (( yD n ) + ,Q ) } Where Q = s + r 1 ( sW ( yx )) +r 2 ( W ( yx )s ) +W ( yx ) The boundary condition is: V N ( x,s ) = max y ≥ x { R · E [min { y,D N } ] + (1 + r 1 )( sW ( yx )) +(1 + r 2 )( W ( yx )s ) + + S · E [( yD N ) + ]W ( yx ) } Where S is the salvage value of the product. So we want to ﬁnd V 1 (0 , 0) based on the above optimality formulation. 1...
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This note was uploaded on 03/16/2012 for the course IEOR 466 taught by Professor Richard during the Spring '12 term at Columbia.
 Spring '12
 Richard

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