The Effects of Inflation and Time Value of Money on a Production Model with a Random Product Life Cycle

摘要

This paper extends Moon and Lee''s EOQ model to consider a production system with a time-value of money and inflation under a random life cycle. Two conditions are discussed: the first is when the product life cycle ends in the production stage and the second is when the product life cycle ends in the non-production stage. We develop an algorithm to find the optimal period time and the lowest expected total cost. Numerical examples and sensitivity analyses are given to validate the results of the production model.