Introduction to Operations Research

9th Edition Hillier Solutions Manual

Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/introduction-to-operations-research-9th-edition-hillier-solutions-manual/
 CHAPTER 10: DYNAMIC PROGRAMMING

10.2-1.
(a) The nodes of the network can be divided into "layers" such that the nodes in the 8th
layer are accessible from the origin only through the nodes in the Ð8  "Ñst layer. These
layers define the stages of the problem, which can be labeled as 8 œ "ß #ß $ß %. The nodes
constitute the states.
Let W8 denote the set of the nodes in the 8th layer of the network, i.e., W" œ ÖS×, W# œ
ÖEß Fß G×, W$ œ ÖHß I× and W% œ ÖX ×. The decision variable B8 is the immediate
destination at stage 8. Then the problem can be formulated as follows:
08‡ Ð=Ñ œ ‡
min Ò-=B8  08" ÐB8 ÑÓ ´ min 08 Ð=ß B8 Ñ for = − W8 and 8 œ "ß #ß $
B8 −W8" B8 −W8"

0%‡ ÐX Ñ œ !
(b) The shortest path is S  F  H  X .

(c) Number of stages: 3

=$ 0$‡ Ð=Ñ B‡$
H 6 X
I ( X
=# 0# Ð=ß HÑ 0# Ð=ß IÑ 0#‡ Ð=Ñ B‡#
E ""  "" H
F "$ "& "$ H
G  "$ "$ I
=" 0" Ð=ß EÑ 0" Ð=ß FÑ 0" Ð=ß GÑ 0"‡ Ð=Ñ B‡"
S #! "* #! "* F
Optimal Solution: B‡" œ F , B‡# œ H and B‡$ œ H.

10-1
(d) Shortest-Path Algorithm:
Solved nodes Closest 8th Distance to
directly connected connected total nearest 8th nearest Last
8 to unsolved nodes unsolved node distance node node connection
1 S F ' F ' SF
# S G ( G ( SG
F H '  ( œ "$
$ S E * E * SE
F H '  ( œ "$
G I (  ' œ "$
% E H *  & œ "% H "$ FH
F H '  ( œ "$
G I (  ' œ "$ I GI
& H X "$  ' œ "* X "* HX
I X "$  ( œ #!

The shortest-path algorithm required ) additions and ' comparisons whereas dynamic
programming required ( additions and $ comparisons. Hence, the latter seems to be more
efficient for shortest-path problems with "layered" network graphs.
10.2-2.
(a)

The optimal routes are S  E  J  X and S  G  L  X , the associated sales

income is "&(. The route S  E  J  X corresponds to assigning ", #, and $
salespeople to regions ", #, and $ respectively. The route S  G  L  X corresponds
to assigning $, #, and " salespeople to regions ", #, and $ respectively.

10-2
(b) The regions are the stages and the number of salespeople remaining to be allocated at
stage 8 are possible states at stage 8, say =8 . Let B8 be the number of salespeople
assigned to region 8 and -8 ÐB8 Ñ be the increase in sales in region 8 if B8 salespeople are
assigned to it. Number of stages: 3.
=$ 0$‡ Ð=$ Ñ B‡$ 0# Ð=# ß B# Ñ
" $# " =# " # $ % 0#‡ Ð=# Ñ B‡#
# %' # # &'    &' 1
$ (! $ $ (! (*   (* #
% )% % % *% *$ *&  *& $
& "!) ""( "!* ""! ""( #
0" Ð=" ß B" Ñ
=" " # $ % 0"‡ Ð=" Ñ B‡"
' "&( "%* "&( "&& "&( "ß $
The optimal solutions are ÐB‡" œ ", B‡# œ #, B‡$ œ $Ñ and ÐB‡" œ $, B‡# œ #, B‡$ œ "Ñ.
10.2-3.
(a) The five stages of the problem correspond to the five columns of the network graph.
The states are the nodes of the graph. Given the activity times >34 , the problem can be
formulated as follows:
08‡ Ð=Ñ œ max Ò>=B8  08"
‡
ÐB8 ÑÓ
B8

0'‡ Ð*Ñ œ !
(b) The critical paths are " Ä # Ä % Ä ( Ä * and " Ä # Ä & Ä ( Ä *.

10-3
(c) Interactive Deterministic Dynamic Programming Algorithm: Number of stages: 4

10.2-4.
(a) FALSE. It uses a recursive relationship that enables solving for the optimal policy for
stage 8 given the optimal policy for stage Ð8"Ñ [Feature 7, Section 10.2, p.446].
(b) FALSE. Given the current state, an optimal policy for remaining stages is
independent of the policy decisions adopted in previous stages. Therefore, the optimal
immediate decision depends on only the current state and not on how you got there. This
is the Principle of Optimality for dynamic programming [Feature 5, Section 10.2, p.446].
(c) FALSE. The optimal decision at any stage depends on only the state at that stage and
not on the past. This is again the Principle of Optimality [Feature 5, Section 10.2, p.446].
10.3-1.
The Military Airlift Command (MAC) employed dynamic programming in scheduling its
aircraft, crew and mission support resources during Operation Desert Storm. The primary
goal was to deliver cargo and passengers on time in an environment with time and space
constraints. The missions are scheduled sequentially. The schedule of a mission imposes
resource constraints on the schedules of following missions. A balance among various
objectives is sought. In addition to maximizing timely deliveries, MAC aimed at reducing
late deliveries, total flying time of each mission, ground time and frequency of crew
changes. Maximizing on-time deliveries is included in the model as a lower bound on the
load of the mission. The problem for any given mission is then to determine a feasible
schedule that minimizes a weighted sum of the remaining objectives. The constraints are
the lower bound constraints, crew and ground-support availability constraints. Stages are
the airfields in the network and states are defined as airfield, departure time, and
remaining duty day. The solution of the problem is made more efficient by exploiting the
special structure of the objective function.
The software developed to solve the problems cost around $2 million while the airlift
operation cost over $3 billion. Hence, even a small improvement in efficiency meant a
considerable return on investment. A systematic approach to scheduling yielded better

10-4
coordination, improved efficiency, and error-proof schedules. It enabled MAC not only
to respond quickly to changes in the conditions, but also to be proactive by evaluating
different scenarios in short periods of time.
10.3-2.
Let B8 be the number of crates allocated to store 8, :8 ÐB8 Ñ be the expected profit from
allocating B8 to store 8 and =8 be the number of crates remaining to be allocated to stores
5 8. Then 08‡ Ð=8 Ñ œ max Ò:8 ÐB8 Ñ  08" ‡
Ð=8 B8 ÑÓ. Number of stages: 3
!ŸB8 Ÿ=8

10-5
10.3-3.
Let B8 be the number of study days allocated to course 8, :8 ÐB8 Ñ be the number of grade
points expected when B8 days are allocated to course 8 and =8 be the number of study
days remaining to be allocated to courses 5 8. Then
08‡ Ð=8 Ñ œ max ‡
Ò:8 ÐB8 Ñ  08" Ð=8 B8 ÑÓ.
"ŸB8 ŸminÐ=8 ß%Ñ

Number of stages: 4
=% 0%‡ Ð=% Ñ B‡%
" % "
# % #
$ & $
% ) %
0$ Ð=$ ß B$ Ñ
=$ " # $ % 0$‡ Ð=$ Ñ B‡$
# )    ) 1
$ ) "!   "! #
% * "! ""  "" $
& "# "" "" "$ "$ %
0# Ð=# ß B# Ñ
=# " # $ % 0#‡ Ð=# Ñ B‡#
$ "$    "$ 1
% "& "%   "& "
& "' "' "'  "' "ß #ß $
' ") "( ") "' ") "ß $
0" Ð=" ß B" Ñ
=" " # $ % 0"‡ Ð=" Ñ B‡"
( "* "* #" #" #" $ß %
Optimal Solution B‡" B‡# B‡$ B‡%
" $ " # "
# % " " "

10-6
10.3-4.
Let B8 be the number of commercials run in area 8, :8 ÐB8 Ñ be the number of votes won
when B8 commercials are run in area 8 and =8 be the number of commercials remaining
to be allocated to areas 5 8. Then
08‡ Ð=8 Ñ œ ‡
max Ò:8 ÐB8 Ñ  08" Ð=8 B8 ÑÓ.
!ŸB8 Ÿ=8

Number of stages: 4

10-7
10.3-5.
Let B8 be the number of workers allocated to precinct 8, :8 ÐB8 Ñ be the increase in the
number of votes if B8 workers are assigned to precinct 8 and =8 be the number of
workers remaining at stage 8. Then
08‡ Ð=8 Ñ œ ‡
max Ò:8 ÐB8 Ñ  08" Ð=8 B8 ÑÓ.
!ŸB8 Ÿ=8

Number of stages: 4

10-8
10.3-6.
Let &B8 be the number of jet engines produced in month 8 and =8 be the inventory at the
beginning of month 8. Then 08‡ Ð=8 Ñ is:
‡
min Ò-8 B8  .8 maxÐ=8  B8  <8 ß !Ñ  08" ÐmaxÐ=8  B8  <8 ß !ÑÑÓ
maxÐ<8 =8 ß!ÑŸB8 Ÿ78

and 0%‡ Ð=% Ñ œ -% maxÐ=%  <% ß !Ñ.

Using the following data adjusted to reflect that B8 is one fifth of the actual production,
Month <8 78 -8 .8
" # & &Þ%! !Þ!(&
# $ ( &Þ&& !Þ!(&
$ & ' &Þ&! !Þ!(&
% % # &Þ'& !Þ!(&
the following tables are produced:
=% 0%‡ Ð=% Ñ B‡%
# ""Þ$! #
$ &Þ'& "
% !Þ!! !
0$ Ð=$ ß B$ Ñ
=$ ! " # $ % & ' 0$‡ Ð=$ Ñ B‡$
"       %%Þ%& %%Þ%& '
#      $)Þ*& $)Þ)(& $)Þ)(& '
$     $$Þ%& $$Þ$(& $$Þ$! $$Þ$! '
%    #(Þ*& #(Þ)(& #(Þ)!  #(Þ)! &
&   ##Þ%& ##Þ$(& ##Þ$!   ##Þ$! %
'  "'Þ*& "'Þ)(& "'Þ)!    "'Þ)! $
( ""Þ%& ""Þ$(& ""Þ$!     ""Þ$! #
0# Ð=# ß B# Ñ
=# ! " # $ % & ' ( 0#‡ Ð=# Ñ B#‡
!     ''Þ(#& ''Þ((& ''Þ)#& ''Þ*& ''Þ(#& %
"    '"Þ"(& '"Þ##& '"Þ#(& '"Þ%! '"Þ&#& '"Þ"(& $
#   &&Þ'#& &&Þ'(& &&Þ(#& &&Þ)& &&Þ*(& &'Þ"! &&Þ'#& #
$  &!Þ!(& &!Þ"#& &!Þ"(& &!Þ$! &!Þ%#& &!Þ&& &!Þ'(& &!Þ!(& "
0" Ð=" ß B" Ñ
=" ! " # $ % & 0"‡ Ð=" Ñ B‡"
!   ((Þ&#& ((Þ%& ((Þ$(& ((Þ$! ((Þ$! &
Hence, the optimal production schedule is to produce & † & œ #& units in the first month,
" † & œ & in the second, ' † & œ $! in the third and # † & œ "! in the last month.

10-9
10.3-7.
(a) Let B8 be the amount in million dollars spent in phase 8, =8 be the amount in million
dollars remaining, :" ÐB" Ñ be the initial share of the market attained in phase 1 when B" is
spent in phase 1, and :8 ÐB8 Ñ be the fraction of this market share retained in phase 8 if B8
is spent in phase 8, for 8 œ #ß $. Number of stages: 3
=$ 0$‡ Ð=$ Ñ B‡$
! !Þ$ !
" !Þ& "
# !Þ' #
$ !Þ( $
0# Ð=# ß B# Ñ
=# ! " # $ 0#‡ Ð=# Ñ B‡#
! !Þ!'    !Þ!' !
" !Þ" !Þ"#   !Þ"# "
# !Þ"# !Þ# !Þ"&  !Þ# "
$ !Þ"% !Þ#% !Þ#& !Þ") !Þ#& #
0" Ð=" ß B" Ñ
=" " # $ % 0"‡ Ð=" Ñ B‡"
% & ' %Þ) $ ' #
The optimal solution is B‡" œ #, B‡# œ ", and B‡$ œ ". Hence, it is optimal to spend two
million dollars in phase 1 and one million dollar in each one the phases 2 and 3. This will
result in a final market share of 6%.
(b) Phase 3: = 0$‡ Ð=Ñ B‡$
!Ÿ=Ÿ% !Þ'  !Þ!(= =
Phase 2: 0# Ð=ß B# Ñ œ Ð!Þ%  !Þ"B# ÑÒ!Þ'  !Þ!(Ð=  B# ÑÓ
œ !Þ!(B##  Ð!Þ!(=  !Þ!$#ÑB#  Ð!Þ#%  !Þ!#)=Ñ
`0# Ð=ßB# Ñ = "'
`B# œ !Þ!"%B#  !Þ!!(=  !Þ!$# œ ! Ê B‡# œ #  (

If = Ÿ #=  "'( : B‡# œ = because 0# Ð=ß B# Ñ is strictly increasing on the interval Ò!ß #=  "'
( Ó,
so on Ò!ß =Ó.

10-10
 = "' = "'
If =  #  (: B‡# œ #  ( because then the global maximizer is feasible.
We can summarize this result as:
B‡# Ð=Ñ œ minŠ #=  ( ß = ‹.
"'

$# = "'
Now since ! Ÿ = Ÿ % Ÿ (, =Ÿ #  (, so B‡# Ð=Ñ œ = and 0#‡ Ð=Ñ œ !Þ!'=  !Þ#%.
Phase 1: 0" Ð%ß B" Ñ œ Ð"!B"  B#" ÑÒ!Þ!'Ð%  B" Ñ  !Þ#%Ó
œ !Þ!'B$"  "Þ!)B#"  %Þ)B"
`0" Ð%ßB" Ñ
`B" œ !Þ")B#" #Þ"'B"  %Þ) œ !
#Þ"'„È#Þ"'# %Ð!Þ")ÑÐ%Þ)Ñ
Ê B‡" œ #Ð!Þ")Ñ œ #Þ*%& or *Þ!&&.

The derivative of 0" Ð%ß B" Ñ is nonnegative for B" Ÿ #Þ*%& and B" *Þ!&& and
nonpositive otherwise, so 0" Ð%ß B" Ñ is nonincreasing on the interval Ò#Þ*%&ß *Þ!&&Ó, and
nondecreasing else. Thus, 0" Ð%ß B" Ñ attains its maximum over the interval Ò!ß %Ó at
B‡" œ #Þ*%& with 0"‡ Ð%Ñ œ 'Þ$!#. Accordingly, it is optimal to spend #Þ*%& million dollars
in Phase 1, "Þ!&& in Phase 2 and Phase 3. This returns a market share of 6.302%.
10.3-8.
Let B8 be the number of parallel units of component 8 that are installed, :8 ÐB8 Ñ be the
probability that the component will function if it contains B8 parallel units, -8 ÐB8 Ñ be the
cost of installing B8 units of component 8, =8 be the amount of money remaining in
hundreds of dollars. Then
08‡ Ð=8 Ñ œ max ‡
Ò:8 ÐB8 Ñ08" Ð=8 -8 ÐB8 ÑÑÓ
B8 œ!ßáßminÐ$ß!=8 Ñ

where !=8 ´ maxÖ! À -8 Ð!Ñ Ÿ =8 ß ! integer×.

=% 0%‡ Ð=% Ñ B‡%
!ß " ! !
# !Þ& "
$ !Þ( #
% Ÿ =% Ÿ "! !Þ* $
0$ Ð=$ ß B$ Ñ œ P$ ÐB$ Ñ0%‡ Ð=$ -$ ÐB$ ÑÑ

10-11
 0$ Ð=$ ß B$ Ñ
=$ ! " # $ 0$‡ Ð=$ Ñ B‡$
! !    ! !
"ß # ! !   ! !ß "
$ ! !Þ$& !  !Þ$& "
% ! !Þ%* ! ! !Þ%* "
& ! !Þ'$ !Þ%! ! !Þ'$ "
' ! !Þ'$ !Þ&' !Þ%& !Þ'$ "
( ! !Þ'$ !Þ(# !Þ'$ !Þ(# #
) Ÿ =$ Ÿ "! ! !Þ'$ !Þ(# !Þ)" !Þ)" $
0# Ð=# ß B# Ñ œ P# ÐB# Ñ0$‡ Ð=# -# ÐB# ÑÑ
0# Ð=# ß B# Ñ
=# ! " # $ 0#‡ Ð=# Ñ B‡#
!ß " !    ! !
#ß $ ! !   ! !ß "
% ! ! !  ! !ß "ß #
& ! !Þ#"! ! ! !Þ#"! "
' ! !Þ#*% ! ! !Þ#*% "
( ! !Þ$() !Þ#%& ! !Þ$() "
) ! !Þ$() !Þ$%$ !Þ#)! !Þ$() "
* ! !Þ%$# !Þ%%" !Þ$*# !Þ%%" #
"! ! !Þ%)' !Þ%%" !Þ&!% !Þ&!% $
0" Ð=" ß B" Ñ œ P" ÐB" Ñ0#‡ Ð=" -" ÐB" ÑÑ
0" Ð=" ß B" Ñ
=" ! " # $ 0"‡ Ð=" Ñ B‡"
"! ! !Þ## !Þ##( !Þ$!# !Þ$!# $
The optimal solution is B‡" œ $, B‡# œ ", B‡$ œ " and B‡% œ $, yielding a system reliability
of 0.3024.
10.3-9.
The stages are 8 œ "ß # and the state is the amount of slack remaining in the constraint,
the goal is to find 0"‡ Ð%Ñ.
=# 0#‡ Ð=# Ñ B‡# 0" Ð=" ß B" Ñ
! ! ! =" ! " # $ % 0"‡ Ð=" Ñ B‡"
" ! ! % "# ' ) ! "' "# !
# % "
$ % "
% "# #
The optimal solution is B‡" œ ! and B‡# œ #.

10-12
10.3-10.
The stages are 8 œ "ß #ß $ and the state is the slack remaining in the constraint, the goal is
to find 0"‡ Ð#!Ñ.
=$ 0$‡ Ð=$ Ñ B‡$ 0# Ð=# ß B# Ñ
!% ! ! =# ! " # 0#‡ Ð=# Ñ B‡#
&* #! " !% !   ! !
"!  "% %! # &' #!   #! !
"&  "* '! $ (* #! $!  $! "
#! )! % "!  "" %! $!  %! !
"#  "$ %! &!  &! "
"% %! &! '! '! #
"&  "' '! &! '! '! !ß #
"(  ") '! (! '! (! "
"* '! (! )! )! #
#! )! (! )! )! !ß #
0" Ð=" ß B" Ñ
=" ! " # $ % & ' 0"‡ Ð=" Ñ B‡"
#! )! "!! ""' "") "#' "$! "#! "$! &
The optimal solution is B‡" œ &, B‡# œ !, B‡$ œ " with an objective value D ‡ œ "$!.
10.3-11.
Let =8 denote the slack remaining in the constraint.
0#‡ Ð=# Ñ œ max ˆ$'B#  $B#$ ‰
Ú  ! for ! Ÿ B  #
!ŸB# Ÿ=#

*B## Û Ê B‡# œ œ
#
`0# Ð=ßB# Ñ =# for ! Ÿ =#  #
Ü  ! for B#  #
`B# œ $'  œ ! for B# œ #
# for # Ÿ =# Ÿ $

0"‡ Ð$Ñ œ max Ò$'B"  *B#"  'B$"  0#‡ Ð$B" ÑÓ

Ú max Ò$'B  *B#  'B$  %)Ó
!ŸB" Ÿ$

œ max Û
" " "
!ŸB" Ÿ"

Ü "ŸB
max Ò$'B"  *B#"  'B"$  $'Ð$B" Ñ  $Ð$B" Ñ$ Ó
Ú
" Ÿ$

Ý
Ý
Ý Ú
")ÐB#"  B"  #Ñ  ! for ! Ÿ B" Ÿ " Ê B"max œ "
Ý  ! for " Ÿ B"  #  È"$
Û È
Ý
Ý *ÐB#"  %B"  *ÑÛ œ ! for B" œ #  È"$ Ÿ Ê B" œ #  "$
`0" Ð$ßB" Ñ
œ
Ý Ý
`B" max

Ü Ü  ! for B"  #  È"$

Since 0" Ð$ß "Ñ  0" Ð$ß #  È"$Ñ, B‡" œ #  È"$ ¶ "Þ'" and B‡# œ &  È"$ ¶ "Þ$*
with the optimal objective value being 0"‡ Ð$Ñ ¶ *)Þ#$.

10-13
10.3-12.
08‡ Ð=8 Ñ œ min Ò"!!ÐB8  =8 Ñ#  #!!!ÐB8  <8 Ñ  08"
‡
ÐB8 ÑÓ
<8 ŸB8 Ÿ#&&

8 œ %:
=% 0%‡ Ð=% Ñ B‡%
#!! Ÿ =% Ÿ #&& "!!Ð#&&  =% Ñ# #&&
8 œ $: 0$ Ð=$ ß B$ Ñ œ "!!ÐB$  =$ Ñ#  #!!!ÐB$  #!!Ñ  "!!Ð#&&  B$ Ñ#
` 0$ Ð=$ ßB$ Ñ
`B$ œ #!!ÐB$  =$ Ñ  #!!!  #!!Ð#&&  B$ Ñ
=$ #%&
œ #!!Ò#B$  Ð=$  #%&ÑÓ œ ! Ê B$ œ #

If "&& Ÿ =$ Ÿ #'&, #!! Ÿ =$ #%&

# Ÿ #&&, so B$ œ =$ #%&
# is feasible for #%! Ÿ =$ Ÿ #&&
‡ # #
and 0$ Ð=$ Ñ œ #&Ð#%&  =$ Ñ  #&Ð#'&  =$ Ñ  "!!!Ð=$  "&&Ñ.
=$ 0$‡ Ð=$ Ñ B‡$
=$ #%&
#%! Ÿ =$ Ÿ #&& #&Ð#%&  =$ Ñ#  #&Ð#'&  =$ Ñ#  "!!!Ð=$  "&&Ñ #

8 œ #: 0# Ð=# ß B# Ñ œ "!!ÐB#  =# Ñ#  #!!!ÐB#  #%!Ñ  0$‡ ÐB# Ñ

` 0# Ð=# ßB# Ñ
`B# œ #!!ÐB#  =# Ñ  #!!!  &!Ð#%&  B# Ñ  &!Ð#'&  B# Ñ  "!!!
#=# ##&
œ "!!Ò$B#  Ð#=#  ##&ÑÓ œ ! Ê B# œ $
#=# ##& #=# ##&
If #%(Þ& Ÿ =# Ÿ #&&, #%! Ÿ $ Ÿ #&&, so B‡# œ $ and

0#‡ Ð=# Ñ œ "!!Š #=# ##&  =# ‹  #!!!Š #=# ##&  #%!‹  0$‡ Š #=# ##& ‹
#
$ $ $
"!!
œ * ÒÐ##&  =# Ñ#  Ð#&&  =# Ñ#  Ð#)&  =# Ñ#  '!Ð$=#  '"&ÑÓ.
#=# ##& ` 0# Ð=# ßB# Ñ
If ##! Ÿ =# Ÿ #%(Þ&, $ Ÿ #%! Ÿ B# , so `B# ! and hence B‡# œ #%! and
0#‡ Ð=# Ñ œ "!!Ð#%!  =# Ñ#  #!!!Ð#%!  #%!Ñ  0$‡ Ð#%!Ñ œ "!!Ð#%!  =# Ñ#  "!"ß #&!.
=# 0#‡ Ð=# Ñ B‡#
##! Ÿ =# Ÿ #%(Þ& "!!Ð#%!  =# Ñ#  "!"ß #&! #%!
"!! # # # #=# ##&
#%(Þ& Ÿ =# Ÿ #&& * ÒÐ##&  =# Ñ  Ð#&&  =# Ñ  Ð#)&  =# Ñ  '!Ð$=#  '"&ÑÓ $

8 œ ": 0" Ð#&&ß B" Ñ œ "!!ÐB"  #&&Ñ#  #!!!ÐB"  ##!Ñ  0#‡ ÐB" Ñ
If ##! Ÿ B" Ÿ #%(Þ&:
` 0# Ð#&&ßB" Ñ
`B" œ #!!ÐB"  %)&Ñ œ ! Ê B‡" œ #%#Þ&.
If #%(Þ& Ÿ B" Ÿ #&&:
` 0# Ð#&&ßB" Ñ )!!
`B" œ $ ÐB"  #%!Ñ  ! Ê B‡" œ #%(Þ&.
The optimal solution is B‡" œ #%#Þ& and
0"‡ Ð#&&Ñ œ "!!Ð#%#Þ&  #&&Ñ#  #!!!Ð#%#Þ&  ##!Ñ  0#‡ Ð#%#Þ&Ñ œ "'#ß &!!.

10-14
 =" 0"‡ Ð=" Ñ B‡"
#&& "'#ß &!! #%#Þ&
Summer Autumn Winter Spring
#%#Þ& #%! #%#Þ& #&&
10.3-13.
Let =8 be the amount of the resource remaining at beginning of stage 8.
8 œ $: max Ð%B$  B#$ Ñ
!ŸB$ Ÿ=$
`
`B$ Ð%B$  B#$ Ñ œ %  #B$ œ ! Ê B‡$ œ #
`#
`B#$
Ð%B$  B#$ Ñ œ #  ! Ê B‡$ œ # is a maximum.

=$ 0$* Ð=$ Ñ B*$

! Ÿ =$ Ÿ # %=$  =#$ =$
# Ÿ =$ Ÿ % % #
8 œ #: max Ò#B#  0$* Ð=#  B# ÑÓ
!ŸB# Ÿ=#

If ! Ÿ =#  B# Ÿ #: max Ò#B#  %Ð=#  B# Ñ  Ð=#  B# Ñ# Ó

!ŸB# Ÿ=#
`
`B# Ò#B#  %Ð=#  B# Ñ  Ð=#  B# Ñ# Ó œ #  #=#  #B# œ ! Ê B#‡ œ =#  "
`#
`B##
Ò#B#  %Ð=#  B# Ñ  Ð=#  B# Ñ# Ó œ #  ! Ê B#‡ œ =#  " is a maximum.

0#* Ð=# Ñ œ #=#  ".

If # Ÿ =#  B# Ÿ %: max Ð#B#  %Ñ, B‡# œ =#  # and 0#* Ð=# Ñ œ #=#  #=#  ".
!ŸB# Ÿ=#

=# 0#* Ð=# Ñ B*#

! Ÿ =# Ÿ " %=#  =## !
" Ÿ =# Ÿ % #=#  " =#  "
8 œ ": max Ò#B#"  0#* Ð%  #B" ÑÓ
!ŸB" Ÿ="

If ! Ÿ %  #B" Ÿ ": max Ò#B#"  %Ð%  #B" Ñ  Ð%  #B" Ñ# Ó œ Ð#B#"  )B" Ñ

!ŸB" Ÿ="
` #
`B" Ð#B"  )B" Ñ œ %B"  ) œ ! Ê B‡" œ #
`#
`B#"
Ð#B#"  )B" Ñ œ %  ! Ê B‡" œ # is a maximum.

0" Ð%ß #Ñ œ ).
If " Ÿ %  #B" Ÿ %: max Ò#B#"  #Ð%  #B" Ñ  "Ó œ Ð#B#"  %B"  *Ñ
!ŸB" Ÿ="
` #
`B" Ð#B"  %B"  *Ñ œ %B"  % œ ! Ê B" œ "

10-15
 `#
`B#"
Ð#B#"  %B"  *Ñ œ %  ! Ê B" œ " is a minimum.

Corner points: " œ %  #B" Ê B" œ $Î#, 0" Ð%ß $Î#Ñ œ (Þ&
% œ %  #B" Ê B" œ !, 0" Ð%ß !Ñ œ * is maximum.
Hence, B‡" œ !, B‡# œ $, B‡$ œ " and 0"‡ Ð%Ñ œ *.
10.3-14.
8 œ #: min #B## Ê B‡# œ È=# and 0#‡ Ð=# Ñ œ #=# ,
B## =#

where =# represents the amount of # used by B## .

8 œ ": minÒB%"  0#‡ ÐÐ#  B#" Ñ ÑÓ œ ÒB"%  #Ð#  B"# Ñ Ó,
B"

where Ð#  B#" Ñ œ maxÖ!ß #  B"# ×.

`
If B#" Ÿ #: %
`B" ÐB"  %  #B#" Ñ œ %B$"  %B" œ ! Ê B" œ !ß "ß ".
`#
`B#"
ÐB%"  %  #B#" Ñ œ "#B#"  %
`#
B" œ !, `B#"
ÐB%"  %  #B#" Ñ œ %  !, so B" œ ! is a local maximum.
`#
B" œ "ß ", `B#"
ÐB%"  %  #B#" Ñ œ )  !, so B" œ "ß " are local minima
with D œ $.
If B#" #: B" œ ! and D œ %  $.
Hence, ÐB‡" ß B‡# Ñ − ÖÐ"ß "Ñß Ð"ß "Ñß Ð"ß "Ñß Ð"ß "Ñ×, all with D ‡ œ $.
10.3-15.
(a) Let =8 − Ö"ß #ß %× be the remaining factor % entering stage 8.
8 œ $: 8 œ #:
=$ 0$* Ð=$ Ñ B‡$ 0# Ð=# ß B# Ñ
" "' " =# " # % 0#‡ Ð=# Ñ B‡#
# $# # " #!   #! "
% '% $ # $' $#  $' "
% ') %) )! )! %
8 œ ":
0" Ð=" ß B" Ñ
=" " # % 0"‡ Ð=" Ñ B‡"
% )" %% )% )% %
The optimal solution is ÐB‡" ß B‡# ß B‡$ Ñ œ Ð%ß "ß "Ñ with D ‡ œ )%.
(b) As in part (a), let =8 be the remaining factor (not necessarily integer) at stage 8.
0$‡ Ð=$ Ñ œ "'=$ and B‡$ œ =$

10-16
0#‡ Ð=# Ñ œ max Ö%B##  0$‡ Ð=# ÎB# Ñ× œ max Ö%B##  "'=# ÎB# ×
"ŸB# Ÿ=# "ŸB# Ÿ=#
` 0# Ð=# ßB# Ñ ` # 0# Ð=# ßB# Ñ
`B# œ %B#  "'=# ÎB## and `B##
œ %  $#=# ÎB#$  !

when =# , B# !. Thus 0# Ð=# ß B# Ñ is convex in B# when =# , B# !. The maximum should

occur at one of the endpoints.
B# œ ", 0# Ð=# ß "Ñ œ %  "'=#
B# œ =# , 0# Ð=# ß =# Ñ œ %=##  "'
%  "'=# %=##  "' Í Ð=#  $ÑÐ=#  "Ñ Ÿ ! Í " Ÿ =# Ÿ $

B‡# œ œ and 0#‡ Ð=# Ñ œ œ #

" if " Ÿ =# Ÿ $ %  "'=# if " Ÿ =# Ÿ $
=# if $ Ÿ =# Ÿ % %=#  "' if $ Ÿ =# Ÿ %
0"‡ Ð=" Ñ œ max ÖB"$  0#‡ Ð%ÎB" Ñ×
"ŸB" Ÿ%

œ maxœ max šB$"  %Š "'

B#"
‹  "'›ß max šB$"  %  "'Š B%" ‹›
"ŸB" Ÿ%Î$ %Î$ŸB" Ÿ%

`#
`B#"
šB$"  %Š "'
B#
‹  "'› œ 'B"  #!%ÎB"%  ! when B" !
"

`#
`B#"
šB$"  %  "'Š B%" ‹› œ 'B"  "#)ÎB"#  ! when B" !

Hence, the maximum occurs at an endpoint.

B" œ ", 0" Ð=" ß "Ñ œ )"
B" œ %Î$, 0" Ð=" ß %Î$Ñ ¸ &%Þ$(
B" œ %, 0" Ð=" ß %Ñ œ )%
0"‡ Ð=" Ñ œ maxÖ)"ß &%Þ$(ß )%× œ )% and ÐB‡" ß B‡# ß B‡$ Ñ œ Ð%ß "ß "Ñ, just as when the
variables are restricted to be integers.
10.3-16.
Let =8 be the slack remaining in the constraint B"  B#  B$ Ÿ ", entering the 8th stage.
0$‡ Ð=$ Ñ œ max B$ œ =$ and B‡$ œ =$
!ŸB$ Ÿ=$

0#‡ Ð=# Ñ œ max ÖÐ"  B# Ñ0$‡ Ð=#  B# Ñ× œ max ÖÐ"  B# ÑÐ=#  B# Ñ×

=
# ŸB# =# ŸB#

where =
# œ maxÖ=# ß !×.
` 0# Ð=# ßB# Ñ
`B# œ #B#  Ð=#  "Ñ œ ! Ê B# œ Ð"  =# ÑÎ#
` # 0# Ð=# ßB# Ñ
`B##
œ #  !, so 0# Ð=# ß B# Ñ is concave in B# .

B# œ Ð=#  "ÑÎ#, 0# Ð=# ß Ð"  =# ÑÎ#Ñ œ Ð"  =# Ñ# Î%

# , 0# Ð=# ß =# Ñ œ œ
! if =# Ÿ !
B# œ = 
=# if =# !

10-17
Ð"  =# Ñ# Î# maxÖ!ß =# ×
B# œ Ð"  =# ÑÎ# is feasible if and only if =
# Ÿ Ð"  =# ÑÎ#, equivalently when =# ".

0#‡ Ð=# Ñ œ œ œ
! if =# Ÿ " ‡ =
# œ =# if =# Ÿ "
# and B# œ
Ð"  =# Ñ Î% if =# " Ð"  =# ÑÎ# if =# "

maxœ max šB" Š %"  Ð"  B" Ñ‹›ß !

B#
0"‡ Ð=" Ñ œ maxÖB" 0#‡ Ð"  B" Ñ× œ
B" ! !ŸB Ÿ# "

max š %  B#"  B" ›

B$"
œ
!ŸB" Ÿ#

#„È%$
`B" š %  B#"  B" › œ
$
` B" $B#" % #
%  #B"  " œ ! Ê B" œ $Î# œ $ „ $

Hence, ÐB‡" ß B‡# ß B‡$ Ñ œ Ð#Î$ß "Î$ß #Î$Ñ and D ‡ œ )Î#(.

10.3-17.
Let = œ ÐV" ß V# Ñ, where V3 is the slack in the 3th constraint.
8 œ #: 0# ÐV" ß V# ß B# Ñ œ #B# , ! Ÿ B# Ÿ minÖV" Î#ß V# ×
= 0#‡ Ð=Ñ B‡#

ŒV 
V"
"!minÖV" Î#ß V# × minÖV" Î#ß V# ×
#

8 œ ": 0" Ð'ß )ß B" Ñ œ "&B"  0#‡ Ð'  B" ß )  $B" Ñ

œ "&B"  "!minÖÐ'  B" ÑÎ#ß )  $B" ×, for ! Ÿ B" Ÿ )Î$

œœ
"!B"  $! if ! Ÿ B" Ÿ #
)!  "&B" if # Ÿ B" Ÿ )Î$

max 0" Ð'ß )ß B" Ñ œ maxœ max 0" Ð'ß )ß B" Ñß max 0" Ð'ß )ß B" Ñ œ &!
!ŸB" Ÿ)Î$ !ŸB" Ÿ# #ŸB" Ÿ)Î$

and B‡" œ #.
The optimal solution is ÐB‡" ß B‡# Ñ œ Ð#ß #Ñ and D ‡ œ &!.

10-18
10.3-18.
Let = œ ÐV" ß V# Ñ, where V3 is the slack in the 3th constraint.

0$ ÐV" ß V# ß B$ Ñ œ œ
! if B$ œ !
"  B$ if B$  !

0$‡ ÐV" ß V# Ñ œ maxœ!ß max Ð"  B$ Ñ œ maxÖ!ß "  ÐV" Î#Ñ×

!ŸB$ ŸV" Î#

œœ
"  ÐV" Î#Ñ if ! Ÿ V" Ÿ #
! if V" #

B‡$ œ œ "
V Î# if ! Ÿ V" Ÿ #
! if V" #
0# ÐV" ß V# ß B# Ñ œ (B#  0$‡ ÐV"  $B# ß V# Ñ

œœ
(B#  "  ÐV"  $B# ÑÎ# if ! Ÿ V"  $B# Ÿ #
(B# if V"  $B# #

0#‡ ÐV" ß V# Ñ œ max œ!ß max Ð"  B$ Ñ œ maxÖ!ß "  ÐV" Î#Ñ×
Ú
!ŸB# ŸminÖV" Î$ßV# × !ŸB$ ŸV" Î#

Ý (V$ " if V$" Ÿ V#

œ Û (V#
Ý "(V#
if V"$# Ÿ V# Ÿ V"

Ü # "
$
V"
if V# Ÿ V"$#
Ú
#

Ý V$" if V$" Ÿ V#
B‡# œ Û V#
Ý
if V"$# Ÿ V# Ÿ V"

Ü V#
$
if V# Ÿ V"$#
0"‡ Ð'ß &Ñ œ max Ò$B"  0#‡ Ð'  B" ß &  B" ÑÓ
!ŸB" Ÿ&

œ maxœ max ’$B"  (Ð'B" Ñ

$ “ß max Ò$B"  (Ð&  B" ÑÓ
!ŸB" Ÿ*Î# *Î#ŸB" Ÿ&

œ maxœ max ’ #B$"  "%“ß max Ò$&  #B" Ó œ "(

!ŸB" Ÿ*Î# *Î#ŸB" Ÿ&

The optimal solution is ÐB‡" ß B‡# ß B‡$ Ñ œ Š *# ß "# ß !‹ and D ‡ œ "(.

10.4-1.
Let =8 be the current fortune of the player, E be the event to have $100 at the end and \8
be the amount bet at the 8th match.
0$‡ Ð=$ Ñ œ max ÖPÖEl=$ ××
!ŸB$ Ÿ=$

! Ÿ =$  &!, 0$‡ Ð=$ Ñ œ !.

10-19
&! Ÿ =$  "!!, 0$‡ Ð=$ Ñ œ œ
! if B‡$ Á "!!  =$
"Î# if B‡$ œ "!!  =$

=$ œ "!!, 0$‡ Ð=$ Ñ œ œ

! if B‡$  !
" if B‡$ œ !

=$  "!!, 0$‡ Ð=$ Ñ œ œ

! if B‡$ Á =$  "!!
"Î# if B‡$ œ =$  "!!
=$ 0$‡ Ð=$ Ñ B‡$
! Ÿ =$  &! ! ! Ÿ B‡$ Ÿ &!
&! Ÿ =$  "!! "Î# "!!  =$
=$ œ "!! " !
"!!  =$ "Î# =$  "!!

0#‡ Ð=# Ñ œ max ’ " 0$‡ Ð=#  B# Ñ  "# 0$‡ Ð=#  B# Ñ“

!ŸB# Ÿ=# #

=# 0#‡ Ð=# Ñ B‡#

! Ÿ =#  #& ! ! Ÿ B# Ÿ =#
#& Ÿ =#  &! ! ! Ÿ B# Ÿ &!  =#
"Î% &!  =# Ÿ B# Ÿ =#
=# œ &! "Î% ! Ÿ B#  &!
"Î# B# œ &!
&!  =#  (& "Î# ! Ÿ B#  =#  &!
"Î% =#  &!  B#  "!!  =#
"Î# B# œ "!!  =#
"Î% "!!  =#  B# Ÿ =#
=# œ (& "Î# ! Ÿ B#  #&
$Î% B# œ #&
"Î% #& Ÿ B# Ÿ (&
(&  =#  "!! "Î# ! Ÿ B#  "!!  =#
$Î% B# œ "!!  =#
"Î# "!!  =#  B# Ÿ =#  &!
"Î% =#  &!  B# Ÿ =#
=# œ "!! " B# œ !
"Î# !  B# Ÿ &!
"Î% &! Ÿ B# Ÿ "!!
"!!  =# "Î# ! Ÿ B# Ÿ =#  "!!
$Î% B# œ =#  "!!
"Î# =#  "!!  B# Ÿ =#  &!
"Î% =#  &!  B# Ÿ =#
The entries in bold represent the maximum value in each case.
0"‡ Ð(&Ñ œ max ’ " 0#‡ Ð(&  B" Ñ  "# 0#‡ Ð(&  B" Ñ“
!ŸB" Ÿ(& #

10-20
 Ú
Ý
Ý
Ý
Ý &Î)
$Î% if B" œ !

0" Ð(&ß B" Ñ œ Û $Î%

if !  B"  #&
Ý
Ý
if B" œ #&
Ý
Ý "Î#
Ü $Î)
if #&  B" Ÿ &!
if &!  B" Ÿ (&
=" 0"‡ Ð=" Ñ B‡"
(& $Î% ! or #&
Policy B" won "st bet lost "st bet won #nd bet lost #nd bet
" ! #& #& ! &!
# #& ! &! ! !
10.4-2.
(a) Let B8 − Ö!ß Eß F× be the investment made in year 8, =8 be the amount of money on
hand at the beginning of year 8 and 08 Ð=8 ß B8 Ñ be the maximum expected amount of
money by the end of the third year given =8 and B8 .
‡
For ! Ÿ =8  "!ß !!!, since one cannot invest less than $"!ß !!!, 08 Ð=8 ß B8 Ñ œ 08" Ð=8 Ñ
‡
and B8 œ !.
For =8 "!ß !!!,
Ú 0 ‡ Ð=8 Ñ
08 Ð=8 ß B8 Ñ œ Û !Þ#&08" Ð=8  "!ß !!!Ñ  !Þ(&08" Ð=8  "!ß !!!Ñ if B8 œ E
8" if B8 œ !

Ü !Þ*08"
‡ ‡
‡ ‡
Ð=8 Ñ  !Þ"08" Ð=8  "!ß !!!Ñ if B8 œ F
=$ 0$‡ Ð=$ Ñ B‡$
! Ÿ =$  "!ß !!! =$ !
=$ "!ß !!! =$  &ß !!! E
0# Ð=# ß B# Ñ
=# ! E F 0#‡ Ð=# Ñ B‡#
! Ÿ =#  "!ß !!! =#   =# !
"!ß !!! Ÿ =#  #!ß !!! =#  &ß !!! =#  )ß (&! =#  'ß !!! =#  )ß (&! E
=# #!ß !!! =#  &ß !!! =#  "!ß !!! =#  'ß !!! =#  "!ß !!! E
0" Ð=" ß B" Ñ
=" ! E F 0"‡ Ð=" Ñ B‡"
"!ß !!! ")ß (&! ##ß &!! "*ß )(& ##ß &!! F
The optimal policy is to invest in E as long as there is enough money. The expected
fortune after three years using this strategy is $##,&!!.
(b) Let B8 and =8 be defined as in (a). Let 08 Ð=8 ß B8 Ñ be the maximum probability of
having at least $#0,000 after 3 years given =8 and B8 .

10-21
 0$ Ð=$ ß B$ Ñ
=$ ! E F 0$‡ Ð=$ Ñ B‡$
! Ÿ =$  "!ß !!! !   ! !
"!ß !!! Ÿ =$  #!ß !!! ! !Þ(& !Þ" !Þ(& E
#!ß !!! Ÿ =$  $!ß !!! " !Þ(& " " !ß F
=$ $!ß !!! " " " " !ß Eß F
0# Ð=# ß B# Ñ
=# ! E F 0#‡ Ð=# Ñ B‡#
! Ÿ =#  "!ß !!! !   ! !
"!ß !!! Ÿ =#  #!ß !!! !Þ(& !Þ(& !Þ((& !Þ((& F
=# #!ß !!! " !Þ(& " " !ß F
0" Ð=" ß B" Ñ
=" ! E F 0"‡ Ð=" Ñ B‡"
"!ß !!! !Þ((& !Þ(& !Þ(*(& !Þ(*(& F
With this objective, there is a number of optimal policies. The optimal action in the first
period is to invest in F . If the return from it is only $"!ß !!!, one is indifferent between
investing in F or not investing at all in the second year. Depending on the second year's
investment choice and its return, third year's starting budget can be either $"!ß !!!,
$#!ß !!! or $$!ß !!!. If it is $"!ß !!!, then it is best to invest it in E. If it is $#!ß !!!,
investing in F or not investing are best. Finally if it is $$!ß !!!, anything is optimal,
since $#!ß !!! is guaranteed. Using this policy, the probability of having at least $#!ß !!!
by the end of the third year is !Þ(*(&.
10.4-3.
08 Ð"ß B8 Ñ œ OÐB8 Ñ  B8  Š "$ ‹ 08" Ð"Ñ  ’"  Š "$ ‹ “08"
B8 B8
‡ ‡
Ð!Ñ

œ OÐB8 Ñ  B8  Š "$ ‹ 08"

B8
‡
Ð"Ñ

since 08‡ Ð!Ñ œ ! for every 8. 0$‡ Ð"Ñ œ "', 0$‡ Ð!Ñ œ ! and OÐB8 Ñ œ ! if B8 œ !,
OÐB8 Ñ œ $ if B8  !.
0# Ð=# ß B# Ñ
=# ! " # $ % 0#‡ Ð=# Ñ B‡#
! !     ! !
" "' *Þ$$ 'Þ() 'Þ&* (Þ#! 'Þ&* $
0" Ð=" ß B" Ñ
=" ! " # $ % 0"‡ Ð=" Ñ B"‡
" 'Þ&* 'Þ#! &Þ($ 'Þ#% (Þ!) &Þ($ #
The optimal policy is to produce two in the first run and to produce three in the second
run if none of the items produced in the first run is acceptable. The minimum expected
cost is $&(3.

10-22
10.4-4.
08‡ Ð=8 Ñ œ maxš "$ 08"
‡
Ð=8  B8 Ñ  #$ 08"
‡
Ð=8  B8 Ñ›,
B8 !

with 0'‡ Ð=' Ñ œ ! for ='  & and 0'‡ Ð=' Ñ œ " for =' &.
=& 0&‡ Ð=& Ñ B&‡
! ! !
" ! !
# ! !
$ #Î$ B‡& #
% #Î$ B‡& "
=& & " B‡& Ÿ =&  &
0% Ð=% ß B% Ñ
=% ! " # $ % 0%‡ Ð=% Ñ B‡%
! !     ! !
" ! !    ! !
# ! %Î* %Î*   %Î* "ß #
$ #Î$ %Î* #Î$ #Î$  #Î$ !Þ#ß $
% #Î$ )Î* #Î$ #Î$ #Î$ )Î* "
=% & "     " B‡% Ÿ =%  &
0$ Ð=$ ß B$ Ñ
=$ ! " # $ % 0$‡ Ð=$ Ñ B‡$
! !     ! !
" ! )Î#(    )Î#( "
# %Î* %Î* "'Î#(   "'Î#( #
$ #Î$ #!Î#( #Î$ #Î$  #!Î#( "
% )Î* )Î* ##Î#( #Î$ #Î$ ##Î#( !ß "
=$ & "     " B‡$ Ÿ =$  &
0# Ð=# ß B# Ñ
=# ! " # $ % 0#‡ Ð=# Ñ B#‡
! !     ! !
" )Î#( $#Î)"    $#Î)" "
# "'Î#( %)Î)" %)Î)"   %)Î)" !ß "ß #
$ #!Î#( '%Î)" '#Î)" #Î$  '%Î)" "
% #%Î#( (%Î)" (!Î)" '#Î)" #Î$ (%Î)" "
=# & "     " B‡# Ÿ =#  &
0" Ð=" ß B" Ñ
=" ! " # 0"‡ Ð=" Ñ B‡"
# %)Î)" "'!Î#%$ "#%Î#%$ "'!Î#%$ "
The probability of winning the bet using the policy given above is "'!Î#%$ œ !Þ'&).

10-23
10.4-5.
Let B8 − ÖEß H× denote the decision variable of quarter 8 œ "ß #ß $, where E and H
represent advertising or discontinuing the product respectively. Let =8 be the level of
sales (in millions) above (=8 !) or below (=8 Ÿ !) the break-even point for quarter
Ð8  "Ñ. Let 08 Ð=8 ß B8 Ñ represent the maximum expected discounted profit (in millions)
from the beginning of quarter 8 onwards given the state =8 and decision B8 .
" ' ,8 " ' ,8 ‡
08 Ð=8 ß B8 Ñ œ $!  &’=8  ,8 +8 +8 >.>“  ,8 +8 +8 08" Ð=8  >Ñ>.>,

where +8 and ,8 are given in the table that follows.

8 +8 ,8
" " &
# ! %
$ " $
For " Ÿ 8 Ÿ $,
" ' ,8 ‡
08 Ð=8 ß EÑ œ $!  &’=8  # “
+8 ,8
 ,8 +8 +8 08" Ð=8  >Ñ.>,

08 Ð=8 ß HÑ œ #!.
Note that once discontinuing is chosen the process stops.
08‡ Ð=8 Ñ œ maxÖ08 Ð=8 ß EÑß 08 Ð=8 ß HÑ×
8 œ %:

0%‡ Ð=% Ñ œ œ
#! if =%  !
%!=% if =% !
8 œ $:
0$ Ð=$ ß HÑ œ #!
0$ Ð=$ ß EÑ œ $!  &Ð=$  "Ñ  "% '" 0%‡ Ð=$  >Ñ.>,
$

For $ Ÿ =$ Ÿ ",

0$ Ð=$ ß EÑ œ $!  &Ð=$  "Ñ  "% ’'" $ #!.>  '=$ %!Ð=$  >Ñ.>“ œ &Ð=$  %Ñ#  '&
= $

0$‡ Ð=$ Ñ œ maxÖ&Ð=$  %Ñ#  '&ß #!× œ œ

#! if $ Ÿ =$ Ÿ ", and B‡$ œ H,
&Ð=$  %Ñ#  '& if " Ÿ =$ Ÿ ", and B‡$ œ E.
For " Ÿ =$ Ÿ &,
0$ Ð=$ ß EÑ œ $!  &Ð=$  "Ñ  "% '" %!Ð=$  >Ñ.> œ "&  %&=$
$

0$‡ Ð=$ Ñ œ maxÖ"&  %&=$ ß #!× œ "&  %&=$ and B‡$ œ E.

10-24
 =$ 0$‡ Ð=$ Ñ B‡$
$ Ÿ =$ Ÿ " #! H
" Ÿ =$ Ÿ " &Ð=$  %Ñ#  '& E
" Ÿ =$ Ÿ & "&  %&=$ E
8 œ #:
0# Ð=# ß HÑ œ #!
0# Ð=# ß EÑ œ $!  &Ð=#  "Ñ  "% '" 0$‡ Ð=#  >Ñ.>,
$

For $ Ÿ =# Ÿ ",
'"
$ ‡
0$ Ð=#  >Ñ.> œ '"
=# "
#!.>  '=# "
"=#
Ò&Ð=#  >  %Ñ#  '&Ó.>  '"=# Ò"&  %&Ð=#  >ÑÓ.>
%

0# Ð=# ß EÑ œ &% Ð *# =##  %(=#  %#(

' Ñ

Observe that 0# Ð$ß EÑ œ ""!Î$  0# Ð=# ß HÑ œ #!  0# Ð"ß EÑ œ #"&Î', so we

need to find $ Ÿ =# Ÿ " such that 0# Ð=# ß EÑ œ 0# Ð=# ß HÑ.
& * # %#( %()È"!
% Ð # =#  %(=#  ' Ñ œ #! & $ Ÿ =# Ÿ " Ê =‡# œ * œ #Þ%""
For " Ÿ =# Ÿ ",
'"
$ ‡
0$ Ð=#  >Ñ.> œ '! # Ò&Ð=#  >  %Ñ#  '&Ó.>  '"=# Ò"&  %&Ð=#  >ÑÓ.>
"= %

0# Ð=# ß EÑ œ &% ’ "$ Ð=#  %Ñ$  *# Ð=#  %Ñ#  #!=#  ' “

"!$

Since 0# Ð"ß EÑ œ #"&Î' and 0# Ð=# ß EÑ is increasing in " Ÿ =# Ÿ ", B‡# œ E is the
optimal decision in this interval.
=# 0#‡ Ð=# Ñ B‡#
$ Ÿ =# Ÿ =‡# #! H
& * # %#(
=‡#  =# Ÿ " % Ð # =#  %(=#  ' Ñ E

% ’ $ Ð=# ' “
& "
" Ÿ =# Ÿ "  %Ñ$  *# Ð=#  %Ñ#  #!=#  "!$
E

8 œ ":
0" Ð%ß HÑ œ #!
0" Ð%ß EÑ œ $!  &Ð%  $Ñ  "% '" 0#‡ Ð%  >Ñ.>
&

œ $&  "% ’'"=#% #!.>  %& '=$‡#% Ð #* Ð%  >Ñ#  %(Ð%  >Ñ 
‡
%#(
' Ñ.>

 &% '$ ’ $" >$  #* >#  #!Ð%  >Ñ  ' “.>“

& "!$
œ %Þ((

=" 0"‡ Ð=" Ñ B‡"

% %Þ(( E
1st Quarter 2nd Quarter 3rd Quarter
Advertise. If =# Ÿ #Þ%"", discontinue. If =$ Ÿ ", discontinue.
If =#  #Þ%"", advertise. If =$  ", advertise.

10-25