Comparison with Optimal Dynamic Programming Solutions

In Chap. 3 we established the so called LNQ-approach to inventory production problems having no quadratic performance criterion. This approach, as we know, is suboptimal because of the linearity assumption (3.2). It will now be our main concern to study the effects of this crucial assumption in some detail. I.e. we shall compare the linear approach with the exact solution which will be derived by a dynamic programming procedure. We refer to the models stated in Chap. 1 and Sec. 3.1. For easier reference let us state completely the model we will be concerned with in this Chapter.