Optimal control of finite dams: discrete (2-stage) output procedure

The problem discussed is that of determining optimal release rates for finite dams when the release rate may take one of two values and specific costs are involved in increasing and decreasing this release rate. From another point of view, this is a problem of controlling the output simply by switching on and off. A diffusion model is suggested and by considering a family of plausible output policies an optima procedure, which minimises the long-term average cost of operating the dam, is established. Various properties of this output policy are given.