On the relationship between entropy, demand uncertainty, and expected loss
On the relationship between entropy, demand uncertainty, and expected loss
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DOI：
10.1016/j.ejor.2015.03.014
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发表时间：
2015-09
期刊：
影响因子：
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通讯作者：
Adam J. Fleischhacker;P. Fok
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文献类型：
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作者：
Adam J. Fleischhacker;P. Fok
We analyze the effect of demand uncertainty, as measured by entropy, on expected costs in a stochastic inventory model. Existing models studying demand variability’s impact use either stochastic ordering techniques or use variance as a measure of uncertainty. Due to both axiomatic appeal and recent use of entropy in the operations management literature, this paper develops entropy’s use as a demand uncertainty measure. Our key contribution is an insightful proof quantifying how costs are non-increasing when entropy is reduced.
