Dynamic Inventory Management with Financial Constraints

Traditional inventory models focus on operational decisions. In this research, we propose a general framework for incorporating financial states of an organization in multi-period inventory models with lost sales. This approach differs from the traditional ones in that operational decisions are correlated with and constrained by financial flows of the firm. We study the borrowing and and lending actions of the firm with or without loan limits. We characterize the optimal inventory management decisions and its dependence structure on the financial decisions.

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