Consider the inventory model of Section 3.1. Suppose that unfulfilled demand is not back ordered… 1 answer below »

Consider the inventory model of Section 3.1. Suppose that unfulfilled demand is not back ordered but is lost.

(a) Set up the corresponding transition probability matrix for the endof-period inventory level Xn.

(b) Express the long run fraction of lost demand in terms of the demand distribution and limiting probabilities for the end-of-period inventory.