Dave’s photography store has the following inventory problem. The store stocks a particular type of camera that can be ordered weekly. Let Dt represents the demand for the type of cameras in week t and Dt are independent an identically distributed random variables talking on the values, 0, 1, 2, each with probability of 1/3. There are 2 cameras on hand at the beginning of week 1. At the end of each week, Dave will order 2 cameras from the manufacturer only if the camera is sold out. Otherwise, no ordering will take place. And the ordered 2 cameras will be delivered be delivered by the Monday morning of next week. Dave worries about the ordering cost and the penalty cost for unsatisfied demand. For the ordering cost, Dave pays $10 fixed shopping charge for each order, $20 for buying one camera, and $50 for buying two cameras. For unsatisfied demand, Dave pays $50 for each camera order that cannot be satisfied. A) Find Dave’s long-run expected average ordering and penalty cost per week.

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Dave’s photography store has the following inventory problem. The store stocks a particular type of camera that can be ordered weekly. Let Dt represents the demand for the type of cameras in week t and Dt are independent an identically distributed random variables talking on the values, 0, 1, 2, each with probability of 1/3. There are 2 cameras on hand at the beginning of week 1. At the end of each week, Dave will order 2 cameras from the manufacturer only if the camera is sold out. Otherwise, no ordering will take place. And the ordered 2 cameras will be delivered be delivered by the Monday morning of next week. Dave worries about the ordering cost and the penalty cost for unsatisfied demand. For the ordering cost, Dave pays $10 fixed shopping charge for each order, $20 for buying one camera, and $50 for buying two cameras. For unsatisfied demand, Dave pays $50 for each camera order that cannot be satisfied. A) Find Dave’s long-run expected average ordering and penalty cost per week.
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