Inventory Control for a Coproduction System Under Demand Uncertainty

We consider a coproduction system that uses a common input to produce multiple products in multiple periods. The demands for these products are stochastic in every period. We determine the optimal production plan in order to minimize the total expected discounted cost over a finite time horizon. Using <inline-formula><tex-math notation="LaTeX">$L^{\natural}$</tex-math></inline-formula>-convexity, we demonstrate that the optimal production quantity is state dependent and obeys several structural properties, such as monotonicity, threshold, and boundedness.