Optimal control strategy for maximizing long-run average profits of a stochastic inventory manangement model

ON-OFF Economic Order Quantity model plays an important role in inventory problem. Traditional model mainly focuses on how to minimize the system costs, neglects its profits. Based on minimizing the system costs, this paper put forwards a new form of the long-run average expected profits. In order to obtain the maximum of the profits, using stochastic calculus and regenerative process theory, we get the explicit form of the long-run average profits. For some explicit parameters, we present its numerical examples, obtain the optimal policy and corresponding maximum of the long-run average expected profits value.