THE WEALTH MAXIMIZING ORDERING QUANTITY: AN EXTENSION

ABSTRACT This paper derives a simple analytical expression for the value maximizing economic ordering quantity (EOQ). The traditional EOQ formula can be derived from this expression through a second‐order Taylor series expansion. This connection explains McDaniel's recent simulation results sho...

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Bibliographic Details
Published inThe Financial review (Buffalo, N.Y.) Vol. 23; no. 2; pp. 227 - 232
Main Author Rodriguez, Ricardo J.
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.05.1988
Subjects
Carrying costs
Discount rates
Economics
Mathematical models
Maximization
Optimal
Order quantity
Simulation
Wealth
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Summary:ABSTRACT This paper derives a simple analytical expression for the value maximizing economic ordering quantity (EOQ). The traditional EOQ formula can be derived from this expression through a second‐order Taylor series expansion. This connection explains McDaniel's recent simulation results showing that the EOQ is an accurate estimator of the optimal ordering quantity.
Bibliography:istex:0DE79B26BD72C6A519BFE80FB55CACB646528029
ark:/67375/WNG-J56QK1PR-L
ArticleID:FIRE227
ISSN:0732-8516
1540-6288
DOI:10.1111/j.1540-6288.1988.tb00788.x