A firm has a contract to deliver a certain product to its
customer in the future. The amount to be delivered is denoted by Q.
The firm collects p dollars for each item from its customers. It
has the option of partially or fully cancelling the delivery, in
which case it faces a penalty payment of u dollars per cancelled
unit. The firm needs to procure the product (or its raw material to
produce) from its suppliers. The product costs w dollars now. The
firm can procure the item now and keep it in its stocks until
delivery. In this case the firm will incur an inventory cost of h
dollars per piece. Alternatively, it can wait for the contract
execution time and procure it then. However, the wholesale price
for the item is uncertain in the future and follows a probability
represented by F(x). What is the optimal quantity for the firm to
procure now if any?
PLEASE SHOW ALL WORK
There are no numbers. it should be shown in terms of variable
( x,y,z,Q, F(x),f(x),p,c,v,etc.)
A firm has a contract to deliver a certain product to its customer in the future. The amount to be delivered is denoted
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A firm has a contract to deliver a certain product to its customer in the future. The amount to be delivered is denoted
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