Plan

 Dynamic programming

 Introduction to Markov decision processes

 Markov decision processes formulation

 Discounted markov decision processes

 Average cost markov decision processes

 Continuous-time Markov decision processes

Xiaolan Xie
 Dynamic programming
 Basic principe of dynamic programming

 Some applications

 Stochastic dynamic programming

Xiaolan Xie
 Dynamic programming
 Basic principe of dynamic programming

 Some applications

 Stochastic dynamic programming

Xiaolan Xie
 Introduction
 Dynamic programming (DP) is a general optimization
technique based on implicit enumeration of the solution
space.
 The problems should have a particular sequential structure,
such that the set of unknowns can be made sequentially.
 It is based on the "principle of optimality"
 A wide range of problems can be put in seqential form and
solved by dynamic programming

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 Introduction

Applications :
• Optimal control
• Most problems in graph theory
• Investment
• Deterministic and stochastic inventory control
• Project scheduling
• Production scheduling

We limit ourselves to discrete optimization

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Illustration of DP by shortest path problem
Problem : We are planning the construction of a
highway from city A to city K. Different construction
alternatives and their costs are given in the following
graph. The problem consists in determine the highway
with the minimum total cost.
14 D 3
B I 10
8 10 G 9

E 5 K
A 10 9
10 8
C 7 8 H J
F
15

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 BELLMAN's principle of optimality
General form:
if C belongs to an optimal path from A to B, then the sub-path A
to C and C to B are also optimal
or
all sub-path of an optimal path is optimal

A
B
optimal C optimal

Corollary :
 SP(xo, y) = min {SP(xo, z) + l(z, y) | z : predecessor of y}

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 Solving a problem by DP

1. Extension
Extend the problem to a family of problems of the same nature
2. Recursive Formulation (application of the principle of optimality)
Link optimal solutions of these problems by a recursive relation
3. Decomposition into steps or phases
Define the order of the resolution of the problems in such a way
that, when solving a problem P, optimal solutions of all other
problems needed for computation of P are already known.
4. Computation by steps

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 Solving a problem by DP

Difficulties in using dynamic programming :

• Identification of the family of problems
• transformation of the problem into a sequential form.

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 Shortest Path in an acyclic graph
• Problem setting : find a shortest path from x0 (root of the graph) to a given
node y0
• Extension : Find a shortest path from x0 to any node y, denoted SP(x0, y)
• Recursive formulation  
SP(y) = min { SP(z) + l(z, y) : z predecessorr of y} 
• Decomposition into steps : At each step k, consider only nodes y with
unknown SP(y) but for which the SP of all precedecssors are known.
• Compute SP(y) step by step
Remarks :
• It is a backward dynamic programming
• It is also possible to solve this problem by forward dynamic programming

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 DP from a control point of view
Consider the control of
(i) a discrete-time dynamic system, with
(ii) costs generated over time depending on the states and the
control actions

action action

State t State t+1

Cost Cost

present decision epoch next decision epoch

Xiaolan Xie
 DP from a control point of view
System dynamics :
x t+1 = ft(xt, ut), t = 0, 1, ..., N-1
where
t : temps index
xt : state of the system
action action
ut = control action to decide at t

State t State t+1

Cost Cost

present decision epoch next decision epoch

Xiaolan Xie
 DP from a control point of view
Criterion to optimize

action action

State t State t+1

Cost
Cost

present decision epoch next decision epoch

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 DP from a control point of view
Value function or cost-to-go function:

action action

State t State t+1

Cost Cost

present decision epoch next decision epoch

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 DP from a control point of view
Optimality equation or Bellman equation

action action

State t State t+1

Cost Cost

present decision epoch next decision epoch

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 Applications

Single machine scheduling (Knapsac)

Inventory control
Traveling salesman problem

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 Applications
Single machine scheduling (Knapsac)

Problem :
Consider a set of N production requests, each needing a
production time ti on a bottleneck machine and generating
a profit pi. The capacity of the bottleneck machine is C.
Question: determine the production requests to confirm in
order to maximize the total profit.
Formulation:

max  pi Xi
subject to:
 ti Xi  C

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 Knapsack Problem
Knapsack Problème :
• Mr Radin can take 7 KG without paying over-weight fee on
his return flight. He decides to take advantage of it and look
for some local products that he can sale at home for extra gain.
• He selects n most interesting objects, weighs each of them,
and bargains the price.
• Which objects should he buy in order to maximize his gain?

Object (i) 1 2 3 4 5 6
Weight (wi) 2 1 1 3 2 1
Expected gain (ri) 8 5 5 6 3 2

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 Knapsack Problem
Generic formulation:
• Time = 1, …, 7
• State st = remaining capacity for objects t, t+1, …
• State space = {0, 1, 2, …, 7}
• Action at time t = selection or not object t
• Action space At(s) = {1=YES, 0=NO} if s ≥ wt and = {0} if s < wt
• Immediate gain at time t
gt(st, ut) = rt if YES
=0 if NO
• State transition or system dynamics:
st+1 = st – wt if YES
= st if NO

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 Knapsack Problem
Value function:
Jn(s) = Maximal gain from objects n, n+1, …, 6 with a
remaing capacity of s KG.
Optimality equation:

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 Knapsack Problem
time
7   6   5   4   3   2   1  
    wi ri wi ri wi ri wi ri wi ri wi ri
    1 2 2 3 3 6 1 5 1 5 2 8
state Jn(s) action Jn(s) action Jn(s) action Jn(s) action Jn(s) action Jn(s) action Jn(s) action
0 0   0 N 0 N 0 N 0 N 0 N 0 N
1 0   2 Y 2 N 2 N 5 Y 5 N 5 N
2 0   2 Y 3 Y 3 N 7 Y 10 Y 10 N
3 0   2 Y 5 Y 6 Y 8 Y 12 Y 13 Y
4 0   2 Y 5 Y 8 Y 11 Y 13 Y 18 Y
5 0   2 Y 5 Y 9 Y 13 Y 16 Y 20 Y
6 0   2 Y 5 Y 11 Y 14 Y 18 Y 21 Y
7 0   2 Y 5 Y 11 Y 16 Y 19 Y 24 Y
    YES NO YES NO YES NO YES NO YES NO YES NO
0     -1 0 -1 0 -1 0 -1 0 -1 0 -1 0 -1
1     2 0 -1 2 -1 2 5 2 5 5 -1 5 =
2     2 0 3 2 -1 3 7 3 10 7 8 10
3     2 0 5 2 6 5 8 6 12 8 13 12
Infeasible
4     2 0 5 2 8 5 11 8 13 11 18 13 action
5     2 0 5 2 9 5 13 9 16 13 20 16
6     2 0 5 2 11 5 14 11 18 14 21 18
7     2 0 5 2 11 5 16 11 19 16 24 19

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 Knapsack Problem

Control map or control policy

stage
1 2 3 4 5 6
0 N N N N N N
1 N N Y N N Y
2 N Y Y N Y Y
state 3 Y Y Y Y Y Y
4 Y Y Y Y Y Y
5 Y Y Y Y Y Y
6 Y Y Y Y Y Y
7 Y Y Y Y Y Y

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 Applications
Inventory control

Problem: determining the purchasing quantity at the beginning

of each period in order to minimize the total expense
• Unit price and the demand
Period i 1 2 3 4 5 6
Demand di (in 000) 3 2 1 2 3 4
Unit price p (in 00 $) 11 18 13 17 20 10

• Storage capacity 5 (in 000), Initial stock = 0

• Fixed order cost K = 20 (00$)
• Unit inventory holding cost h = 1 (00$)

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 Applications
Inventory control

Generic formulation:
• Time = 1, …, 7
• State st = Inventory at the beginning of period t
• State space = {0, 1, 2, …, 5}
• Action at time t = purchasing quantity ut of period t
• Action space A(st) = {max(0, dt – st), …, 5 + dt - st}
• Immediate cost at time t
gt(st, ut) = K + ptut + ht(st + ut - dt) if u > 0
= ht(st + ut - dt) if NO
• State transition or system dynamics:
st+1 = st + ut - dt

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 Applications
Inventory control

Value function:
Jn(s) = minimal total cost over periods n, n+1, …, 6 by
starting with an inventory s at the beginning of period n.
Optimality equation:

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 Applications
Traveling salesman problem

Problem :
Data: a graph with N nodes and a distance matrix
[dij] beteen any two nodes i and j.
Question: determine a circuit of minimum total
distance passing each node once.
Extensions:
C(y, S): shortest path from y to x0 passing once
each node in S.
Application: Machine scheduling with setups.

2007 Xiaolan Xie

 Applications
Total tardiness minimization on a single machine

Job 1 2 3
Due date di 5 6 5
Processing time pi 3 2 4
weight wi 3 1 2

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 Stochastic dynamic programming
Model
Consider the control of
(i) a discrete-time stochastic dynamic system, with
(ii) costs generated over time

perturbation perturbation

action action

State t State t+1

stage cost cost

present decision epoch next decision epoch

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 Stochastic dynamic programming
Model
System dynamics :
x t+1 = ft(xt, ut, wt), t = 0, 1, ..., N-1
where
t : time index
xt : state of the system
ut = decision at time t perturbation
action action

wt : random perturbations
State t State t+1

cost cost

present decision epoch next decision epoch

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 Stochastic dynamic programming
Model
Criterion

perturbation
action action

State t State t+1

cost cost

present decision epoch next decision epoch

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 Stochastic dynamic programming
Example
Consider a problem of ordering a quantity of a certain item at
each of N periods so as to meet a stochastic demand, while
minimizing the incurred expected cost.

xt : stock available at the beginning of period t

ut : quantity ordered at the beginning of period t
wt : random demand during period t with given probability.

xt+1 = xt + ut - wt

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 Stochastic dynamic programming
Example
Cost :
purchaing cost cut
inventory cost : r(xt + ut - wt)
wt
stock at period t stock at period t
Total cost: Inventory
xt
system
xt+1 = xt + ut - wt

order quantity

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 Stochastic dynamic programming
Model
Open-loop control:

Order quantities u1, u2, ..., uN-1 are determined once at time 0

Closed-loop control:

Order quantity ut at each period is determined dynamically with

the knowledge of state xt

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 Stochastic dynamic programming
Control policy
The rule for selecting at each period t a control action ut
for each possible state xt.

Examples of inventory control policies:

1. Order a constant quantity ut = E[wt]

2. Order up to policy :
ut = St – xt, if xt  St
ut = 0, if xt > St
where St is a constant order up to level.

2007 Xiaolan Xie

 Stochastic dynamic programming
Optimal control policy
Mathematically, in closed-loop control, we want to

find a sequence of functions mt, t = 0, ..., N-1, mapping state

xt into control ut

so as to minimize the total expected cost.

The sequence p = {m0, ..., mN-1} is called a policy.

2007 Xiaolan Xie

 Stochastic dynamic programming
Optimal control
Cost of a given policy p = {m0, ..., mN-1},

Optimal control:
minimize Jp(x0) over all possible polciy p

2007 Xiaolan Xie

 Stochastic dynamic programming
State transition probabilities
State transition probabilty:

pij(u, t) = P{xt+1 = j | xt = i, ut = u}

depending on the control policy.

2007 Xiaolan Xie

 Stochastic dynamic programming
Basic problem
A discrete-time dynamic system :
x t+1 = ft(xt, ut, wt), t = 0, 1, ..., N-1

Finite state space st  St

Finite control space ut  Ct

Control policy p = {m0, ..., mN-1} with ut = mt(xt)

State-transition probability: pij(u)

stage cost : gt(xt, mt(xt), wt)

2007 Xiaolan Xie

 Stochastic dynamic programming
Basic problem
Expected cost of a policy

Optimal control policy p* is the policy with minimal cost:

where P is the set of all admissible policies.

J*(x) : optimal cost function or optimal value function.

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 Stochastic dynamic programming
Principle of optimality
Let p* = {m*0, ..., m*N-1} be an optimal policy for the basic
problem for the N time periods.

Then the truncated policy {m*i, ..., m*N-1} is optimal for the
following subproblem
•minimization of the following total cost (called cost-to-go
function) from time i to time N by starting with state xi at
time i

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 Stochastic dynamic programming
DP algorithm
Theorem: For every initial state x0, the optimal cost J*(x0) of
the basic problem is equal to J0(x0), given by the last step of the
following algorithm, which proceeds backward in time from
period N-1 to period 0

Furthermore, if u*t = m*t(xt) minimizes the right side of Eq (B)

for each xt and t, the policy p* = {m*0, ..., m*N-1} is optimal.

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 Stochastic dynamic programming
Example
Consider the inventory control problem with the following:

• Excess demand is lost, i.e. xt+1 = max{0, xt + ut – wt}

• The inventory capacity is 2, i.e. xt + ut  2

• The inventory holding/shortage cost is : (xt + ut – wt)2

• Unit ordering cost is a, i.e. gt(xt,ut,wt) = aut + (xt + ut – wt)2.

• N = 3 and the terminal cost, gN(XN) = 0

• Demand : P(wt = 0) = 0.1, P(wt = 1) = 0.2, P(wt = 2) = 0.7.

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 Stochastic dynamic programming
Example
Generic formulation:
• Time = {1, 2, 3, 4=end}
• State xt = inventory level at the beginning of a period
• State space = {0, 1, 2}
• Action ut = order quantity of period t
• Action space = {0, 1, …, 2 – xt}
• Perturbation dt = demand of period t
• Immediate cost = aut + (xt + ut – dt)2
• System dynamics xt+1 = max{0, xt + ut – dt}

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 Stochastic dynamic programming
Example

Value function:
Jn(s) = minimal total cost over periods n, n+1, …, 3 by
starting with an inventory s at the beginning of period n.
Optimality equation:

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 Stochastic dynamic programming
Example – Immediate cost

a 0,25 dt = w 0 1 2
Pw 0,1 0,2 0,7 mean
0 0 0 1 4 3 mean stage
0 1 1,25 0,25 1,25 1,05 cost
(s,u) 0 2 4,5 1,5 0,5 1,1 =
1 0 1 0 1 0,8 0.1g(s,u,0)+
0.2g(s,u,1)+
1 1 4,25 1,25 0,25 0,85
0.7g(s,u,2)
2 0 4 1 0 0,6
g(s,u,w) = 0.25u+(s+u– w)2

Myopic policy: (s=0, u=1), (s=1, u=0), (s=2, u=0)

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 Stochastic dynamic programming
Example – Period 3-problem
Period n = 3
  a 0,25 dt = w 0 1 2  Mean
      Pw 0,1 0,2 0,7 total
    0 0 0 1 4 3
period-4
  opt   0 1 1,25 0,25 1,25 1,05
s' J4(s') (s,u) 0 2 4,5 1,5 0,5 1,1
0 0   1 0 1 0 1 0,8
1 0   1 1 4,25 1,25 0,25 0,85
2 0   2 0 4 1 0 0,6

Stage cost 0.25u+(s+u–

w)2
+
Remaining cost J4((s+u-w) +
)
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 Stochastic dynamic programming
Example – Periods 2+3-problem

Period n = 2
  a 0,25 dt = w 0 1 2 Mean
      Pw 0,1 0,2 0,7 total
    0 0 1,05 2,05 5,05 4,05
period-3
  opt   0 1 2,05 1,3 2,3 2,075
s' J3(s') (s,u) 0 2 5,1 2,3 1,55 2,055
0 1,05   1 0 1,8 1,05 2,05 1,825
1 0,8   1 1 4,85 2,05 1,3 1,805
2 0,6   2 0 4,6 1,8 1,05 1,555

Stage cost 0.25u+(s+u–

w)2
+
Remaining cost J3((s+u-w) +
)
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 Stochastic dynamic programming
Example – Periods 1+2+3-problem

Period n = 1
  a 0,25 dt = w 0 1 2 Mean
      Pw 0,1 0,2 0,7 total
    0 0 2,055 3,055 6,055 5,055
period-2
  opt   0 1 3,055 2,305 3,305 3,08
s' J2(s') (s,u) 0 2 6,055 3,305 2,555 3,055
0 2,055   1 0 2,805 2,055 3,055 2,83
1 1,805   1 1 5,805 3,055 2,305 2,805
2 1,555   2 0 5,555 2,805 2,055 2,555

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 Stochastic dynamic programming
Example – value function & control
Optimal policy a =0,25
Stock 3-period policy 2-period policy 1-period policy

Stage 1 Stage 2 Stage 3

Cos-to-go Cos-to-go Cos-to-go
(order quantity) (order quantity) (order quantity)

0 3.055 (2) 2.055 (2) 1.05 (1)

1 2.805 (1) 1.805 (1) 0.8 (0)

2 2.555 (0) 1.555 (0) 0.6 (0)

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 Stochastic dynamic programming
Example – Control map or policy

Stock Period-1 Period-2 Period-3

0 2 2 1
Long-term to short-term
1 1 1 0
2 0 0 0

From
Long-term policy: (s=0, u=2), (s=1, u=1), (s=2, u=0)
To
Myopic policy: (s=0, u=1), (s=1, u=0), (s=2, u=0)

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 Stochastic dynamic programming
Example – Sample paths
Stock Period-1 Period-2 Period-3
Control Map 0 2 2 1
1 1 1 0
2 0 0 0

Period-1 Period-2 Period-3 Period-4

Sample path Initial stock 0 0 1 0
Sample Control 2 2 0  
Demand path 1 Demand 2 1 2  
scenarios Initial stock 0 1 0 0
Sample Control 2 1 1  
(2,1,2) path 2 Demand 1 2 1  
Initial stock 0 2 2 1
(1,2,1)
Sample Control 2 0 0  
(0,0,1) path 3 Demand 0 0 1  
Initial stock 2 0 1 0
Sample Control 0 2 0  
path 4 Demand 2 1 2  
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 Sequential decision model
Key ingredients: Policy: Issues:
• A set of decision epochs
a sequence of Existence of opt.
• A set of system states decision rules in policy
• A set of available actions order to mini. the Form of the opt. policy
• A set of state/action cost function Computation of opt.
dependent immediate costs policy
• A set of state/action
dependent transition action action
probabilities
Present Next
state state

costs costs

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 Applications
Inventory management
Bus engine replacement
Highway pavement maintenance
Bed allocation in hospitals
Personal staffing in fire department
Traffic control in communication networks
…

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 Example
• Consider a with one machine producing one product. The
processing time of a part is exponentially distributed with rate
p. The demand arrive according to a Poisson process of rate d.
• state Xt = stock level, Action : at = make or rest

(make, p) (make, p) (make, p)

(make, p)

0 1 2 3
d d d
d

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 Example
• Zero stock policy (M/M/1) p0 = 1-r, p-n = rn p 0, r = d/p

p p p average cost =br/(1-r)

-2 -1 0
d d d

• Hedging point policy with

hedging point 1
p1 = 1-r, p-n = rn+1 p 1
p p p p
average cost =h(1-r) + r.br/(1-r)
-2 -1 0 1
d d d Better iff h/b < r/(1-r)
d

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MDP = Markov Decision Process
MDP Model formulation

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 Decision epochs
Times at which decisions are made.

The set T of decisions epochs can be either a discrete set or a

continuum.

The set T can be finite (finite horizon problem) or infinite

(infinite horizon).

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 State and action sets
At each decision epoch, the system occupies a state.

S : the set of all possible system states.

As : the set of allowable actions in state s.

A = sSAs: the set of all possible actions.

S and As can be:

finite sets
countable infinite sets
compact sets

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 Costs and Transition probabilities
As a result of choosing action a  As in state s at decision epoch t,
• the decision maker receives a cost Ct(s, a) and
• the system state at the next decision epoch is determined by the
probability distribution pt(. |s, a).

If the cost depends on the state at next decision epoch, then

Ct(s, a) =  jS Ct(s, a, j) pt(j|s, a).

where Ct(s, a, j) is the cost if the next state is j.

An Markov decision process is characterized by {T, S, As, pt(. |s, a), Ct(s, a)}

Xiaolan Xie
 Exemple of inventory management
Consider the inventory control problem with the following:

• Excess demand is lost, i.e. xt+1 = max{0, xt + ut – wt}

• The inventory capacity is 2, i.e. xt + ut  2

• The inventory holding/shortage cost is : (xt + ut – wt)2

• Unit ordering cost is 1, i.e. gt(xt, ut, wt) = ut + (xt + ut – wt)2.

• N = 3 and the terminal cost, gN+1(XN+1) = 0

• Demand : P(wt = 0) = 0.1, P(wt = 1) = 0.7, P(wt = 2) = 0.2.

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 Exemple of inventory management
Decision Epochs T = {0, 1, 2, …, N}
Set of states : S = {0, 1, 2} indicating the initial stock Xt
Action set : As indicating the possible order quantity Ut
A0 = {0, 1, 2}, A1 = {0, 1}, A2 = {0}

(s,a) C(s,a) (s,a) P(0|s,a) P(1|s,a) P(2|s,a)

(0, 0) 3 (0, 0) 1
Transition (0, 1) 0,9 0,1
Cost (0, 1) 1,05
probability
function (0, 2) 1,1 (0, 2) 0,2 0,7 0,1
(1, 0) 0,8 (1, 0) 0,9 0,1
(1, 1) 0,85 (1, 1) 0,2 0,7 0,1
(2, 0) 0,6 (2, 0) 0,2 0,7 0,1

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 Decision Rules
A decision rule prescribes a procedure for action selection in each
state at a specified decision epoch.

A decision rule can be either

Markovian (memoryless) if the selection of action at is based

only on the current state st;

History dependent if the action selection depends on the past

history, i.e. the sequence of state/actions ht = (s1, a1, …, st-1, at-1, st)

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 Decision Rules
A decision rule can also be either

Deterministic if the decision rule selects one action with certainty

Randomized if the decision rule only specifies a probability

distribution on the set of actions.

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 Decision Rules
As a result, the decision rules can be:

HR : history dependent and randomized

HD : history dependent and deterministic
MR : Markovian and randomized
MD : Markovian and deterministic

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 Policies
A policy specifies the decision rule to be used at all decision epoch.

A policy p is a sequence of decision rules, i.e. p = {d1, d2, …, dN-1}

A policy is stationary if dt = d for all t.

Stationary deterministic or stationary randomized policies are

important for infinite horizon markov decision processes.

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 Example
Decision epochs: T = {1, 2, …, N}
State : S = {s1, s2}
Actions: As1 = {a11, a12}, As2 = {a21}
Costs: Ct(s1, a11) =5, Ct(s1, a12) =10, Ct(s2, a21) = -1, CN(s1) = rN(s2) 0
Transition probabilities: pt(s1 |s1, a11) = 0.5, pt(s2|s1, a11) = 0.5, pt(s1 |s1,
a12) = 0, pt(s2|s1, a12) = 1, pt(s1 |s2, a21) = 0, pt(s2 |s2, a21) = 1

a11 a11
a21
{5, .5}
{5, .5}
S1 S2 {-1, 1}
a12
{10, 1}
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 Example
A deterministic Markov policy
Decision epoch 1:
d1(s1) = a11, d1(s2) = a21 One state one action
Decision epoch 2: (also called control map)
d2(s1) = a12, d2(s2) = a21

a11 a11
a21
{5, .5}
{5, .5}
S1 S2 {-1, 1}
a12
{10, 1}
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 Example
A randomized Markov policy
Decision epoch 1:
P1, s1(a11) = 0.7, P1, s1(a12) = 0.3
One state
P1, s2(a21) = 1
one proba distribution of actions
Decision epoch 2:
P2, s1(a11) = 0.4, P2, s1(a12) = 0.6
P2, s2(a21) = 1
a11 a11
a21
{5, .5}
{5, .5}
S1 S2 {-1, 1}
a12
{10, 1}
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 Example
A deterministic history-dependent policy
Decision epoch 1: Decision epoch 2:
d1(s1) = a11 history h
d1(s2) = a21 d2(h)
(s1, a11, s1)
One history one action a13
(s1, a12, s1)
a13 infeasible
{0, 1}
a11 a11 (s1, a13, s1)
{5, .5} a11
{5, .5} (s2, a21, s1)
{-1, 1}
S1 S2 infeasible
a21
a12
(*, *, s2)
{10, 1} a21
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 Example
A randomized history-dependent policy
Decision epoch 1: Decision epoch 2:
P1, s1(a11) = 0.6 history h P(a = a11) P(a = a12) P(a = a13)
P1, s1(a12) = 0.3 (s1, a11, s1) 0.4 0.3 0.3

P1, s1(a12) = 0.1 (s1, a12, s1) infeasible infeasible infeasible

(s1, a13, s1) 0.8 0.1 0.1
P1, s2(a21) = 1
(s2, a21, s1) infeasible infeasible infeasible
a13
{0, 1}
a11 a11 at s = s2, select a21
{5, .5} a21
{5, .5} {-1, 1}
S1 S2
a12
{10, 1}
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 Stochastic inventory example revisited
Decision Epochs T = {0, 1, 2, …, N}
Set of states : S = {0, 1, 2} indicating the initial stock Xt
Action set : As indicating the possible order quantity Ut
A0 = {0, 1, 2}, A1 = {0, 1}, A2 = {0}

(s,a) C(s,a) (s,a) P(0|s,a) P(1|s,a) P(2|s,a)

(0, 0) 3 (0, 0) 1
Transition (0, 1) 0,9 0,1
Cost (0, 1) 1,05
probability
function (0, 2) 1,1 (0, 2) 0,7 0,2 0,1
(1, 0) 0,8 (1, 0) 0,9 0,1
(1, 1) 0,85 (1, 1) 0,7 0,2 0,1
(2, 0) 0,6 (2, 0) 0,7 0,2 0,1

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 Stochastic inventory control policies
State s = inventory at the beginning of a period
Action a = order quantity such that s+a  2
MD : Markovian and deterministic
Stationary: {s=0: a = 2, s=1: a=1, s=2: a = 0}
Nonstationary:
{(s,a)=(0,2), (1,1), (2,0)} for period 1 to 5
{(s,a)=(0,1), (1,0), (2,0)} for period 6 on
MR : Markovian and randomized
Stationary: {s=0: a = 2 w.p. 0.5 a=0 w.p. 0.5, s=1: a=1, s=2: a = 0}
Nonstationary:
{(s,a)=(0,2), (1,1), (2,0)} for period 1 to 5
{(s,a)=(0,2 w.p. 0.5 & 0 w.p. 0.5), (1,0), (2,0)} for period 6 on
where w.p. = with probability

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 Stochastic inventory control policies
s Action a
HD
history dependent 0 2
1
if lost sales (s+a-d < 0) for last two periods
if demand for the last period
and deterministic 0 if no demand for the last period

1 1
0
if lost sale for the last period
if no demand for the last period

2 0

s Action a
HR 0 2 if lost sales for last two periods
2 w.p. 0.5 & 0 w.p. 0.5 if demandfor the last period
history dependent 1 w.p. 0.3 & 0 w.p. 0.7 if no demand for the last period
and randomized
1 1 w.p. 0.5 & 0 w.p. 0.5
0
if lost sale for the last period
if no demand for the last period

2 0
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 Remarks
Each Markov policy leads to a discrete time Markov Chain
and the policy can be evaluated by solving the related
Markov chain.

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 Remarks
MD : Markovian and MR : Markovian and
deterministic
randomized
s=0: a = 2,
s=0: a = 2 w.p. 0.5 a=0 w.p. 0.5,
s=1: a=1,
s=1: a=1,
s=2: a = 0
s=2: a = 0

Transition matrix Transition matrix

s 0 1 2 s 0 1 2
0 0,7 0,2 0,1 0 0,85 0,1 0,05
1 0,7 0,2 0,1 1 0,7 0,2 0,1
2 0,7 0,2 0,1 2 0,7 0,2 0,1

Stationary Markov chain (to draw)

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 Remarks
Nonstationary MD : Markovian and deterministic
{(s,a)=(0,2), (1,1), (2,0)} for period 1 to 2
{(s,a)=(0,1), (1,0), (2,0)} for period 3 on

period 1 period 2 period 3 period 4

s 0 1 2 0 1 2 0 1 2 0 1 2
0 0,7 0,2 0,1 0,7 0,2 0,1 0,9 0,1   0,9 0,1  
1 0,7 0,2 0,1 0,7 0,2 0,1 0,9 0,1   0,9 0,1  
2 0,7 0,2 0,1 0,7 0,2 0,1 0,7 0,2 0,1 0,7 0,2 0,1

Non Stationary MR : Markovian and randomized

{(s,a)=(0,2), (1,1), (2,0)} for period 1 to 2
{(s,a)=(0,2 w.p. 0.5 & 0 w.p. 0.5), (1,0), (2,0)} for period 3 on
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Finite Horizon Markov Decision
Processes

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 Assumptions
Assumption 1: The decision epochs T = {1, 2, …, N}

Assumption 2: The state space S is finite or countable

Assumption 3: The action space As is finite for each s

Criterion:

where PHR is the set of all possible policies.

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 Optimality of Markov deterministic policy
Theorem :
Assume S is finite or countable, and that As is finite for each
s  S.

Then there exists a Markovian deterministic policy

which is optimal.

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 Optimality equations
Theorem : The following value functions

satisfy the following optimality equation:

and the action a that minimizes the above term defines the
optimal policy.

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 Optimality equations
The optimality equation can also be expressed as:

where Q(s,a) is a Q-function used to evaluate the

consequence of an action from a state s.

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 Backward induction algorithm
•Set t = N and

•Substitute t-1 for t and compute the following for each st S

3. Repeat 2 till t = 1.

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Infinite Horizon discounted
Markov decision processes

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 Assumptions
Assumption 1: The decision epochs T = {1, 2, …}
Assumption 2: The state space S is finite or countable
Assumption 3: The action space As is finite for each s
Assumption 4: Stationary costs and transition probabilities;
C(s, a) and p(j |s, a), do not vary from decision epoch to
decision epoch
Assumption 5: Bounded costs: | Ct(s, a) |  M for all a  As
and all s  S (to be relaxed)

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 Assumptions
Criterion:

where
0 < l< 1 is the discounting factor
PHR is the set of all possible policies.

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 Discounting factor
Large discounting factor l  1 : long-term optimum

Small discounting factor l  0 : short-term optimum or myopic

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 Optimality equations
Theorem: Under assumptions 1-5, the following optimal cost
function V*(s) exists:

and satisfies the following optimality equation:

Further, V*(.) is the unique solution of the optimality equation.

Moreover, a statonary policy p is optimal iff (if and only if) it
gives the minimum value in the optimality equation.

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 Computation of optimal policy
Value Iteration
Value iteration algorithm:
1.Select any bounded value function V0, let n =0
2. For each s S, compute

3.Repeat 2 until convergence.

Meaning of Vn
4. For each s S, compute

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 Computation of optimal policy
Value Iteration
Theorem: Under assumptions 1-5,
a.Vn converges to V*
b. The stationary policy defined in the value iteration
algorithm converges to an optimal policy.

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 Computation of optimal policy
Policy Iteration
Policy iteration algorithm:
1.Select arbitrary stationary policy p0, let n =0
2. (Policy evaluation) Obtain the value function Vn of policy
pn.
3.(Policy improvement) Choose pn+1 = {dn+1, dn+1,…} such
that

4.Repeat 2-3 till pn+1 = pn.

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 Computation of optimal policy
Policy Iteration
Policy evaluation:
For any stationary deterministic policy p = {d, d, …}, its
value function

is the unique solution of the following equation:

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 Computation of optimal policy
Policy Iteration
Theorem:
The value functions Vn generated by the policy iteration
algorithm is such that Vn+1 <= Vn.
Further, if Vn+1 = Vn, Vn = V*.

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 Computation of optimal policy
Linear programming
Recall the optimality equation

The optimal value function can be determine by the

following Linear programme with a > 0 and Sa(s) = 1:

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 Computation of optimal policy
Linear programming
Dual linear program

1/ Optimal basic solution x* gives a deterministic optimal policy.

2/ x(s, a) = total discounted joint proba under initiate-state distribution a that
the system occupies state s and choose action a
3/ Dual linear program extends to constrained model with upper limit C of
total discounted cost, i.e.

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 Extensition to Unbounded Costs
Theorem 1. Under the condition C(s, a) ≥ 0 (or C(s, a) ≤0) for all
states i and control actions a, the optimal cost function V*(s) among
all stationary determinitic policies satisfies the optimality equation

Theorem 2. Assume that the set of control actions is finite. Then, under
the condition C(s, a) ≥ 0 for all states i and control actions a, we have

where VN(s) is the solution of the value iteration algorithm with V0(s) = 0.
Implication of Theorem 2 : The optimal cost can be obtained as the limit
of value iteration and the optimal stationary policy can also be obtained in
the limit.

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 Example
• Consider a computer system consisting of M different processors.
• Using processor i for a job incurs a finite cost Ci with C1 < C2 < ... < CM.
• When we submit a job to this system, processor i is assigned to our job with
probability pi.
• At this point we can (a) decide to go with this processor or (b) choose to hold the
job until a lower-cost processor is assigned.
• The system periodically return to our job and assign a processor in the same
way.
• Waiting until the next processor assignment incurs a fixed finite cost c.
Question:
How do we decide to go with the processor currently assigned to our job versus
waiting for the next assignment?
Suggestions:
• The state definition should include all information useful for decision
• The problem belongs to the so-called stochastic shortest path problem.
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 Why does it work: Preliminary
• Policy p value function (cost minimization)

• Without loss of generality, 0  C(s, a)  M

Transformation by C’(s, a) = C(s, a) + M if | C(s, a) |  M

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 Why does it work: DP & optimality equation
• DP (Dynamic Programming)

• Optimality equation

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 Why does it work: DP & optimality equation
• DP operator T

• Contraction of the DP operator

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 Why does it work : DP convergence
Lemma 1: If 0  C(s,a)  M, then VN(s) is monotone converging
and limN VN(s) = V*(s)
Property guarantees the existence of V*(s).
Proof. Part one due to VN(s)  VN+1(s) and VN(s)  M/(1-l) .

Due to C(s,a)  M, Due to C(s,a) ≥ 0,

Taking min on both side of the inequalities,

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 Why does it work : convergence of value iteration
Lemma 2: If 0  C(s,a)  M, for any bounded function f, then
limN TN(f(s)) = V*(s) and limN TpN(f(s)) = Vp (s)

Similary, limN TpN(f(s)) = Vp(s)

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 Why does it work : optimality equation
Theorem 1: If 0  C(s,a)  M, V*(s) is the unique bounded
function of the optimality equation. Moreover, any stationary
policy is optimal iff p(s) is any minimizer of the right hand term.

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 Why does it work : optimality equation
Theorem 1: If 0  C(s,a)  M, V*(s) is the unique bounded
function of the optimality equation. Moreover, any stationary
policy is optimal iff p(s) is any minimizer of the right hand term.

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 Why does it work : optimality equation
Theorem A: If 0  C(s,a)  M, V*(s) is the unique bounded
function of the optimality equation. Moreover, any stationary
policy is optimal iff p(s) is any minimizer of the right hand term.

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 Why does it work : convergence of policy iteration
Theorem B: The value functions Vn generated by the policy
iteration algorithm is such that Vn+1  Vn.

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 Why does it work : convergence of policy iteration
Theorem B: The value functions Vn generated by the policy
iteration algorithm is such that Vn+1  Vn.

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Infinite Horizon average cost
Markov decision processes

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 Assumptions
Assumption 1: The decision epochs T = {1, 2, …}
Assumption 2: The state space S is finite
Assumption 3: The action space As is finite for each s
Assumption 4: Stationary costs and transition probabilities;
C(s, a) and p(j |s, a) do not vary from decision epoch to
decision epoch
Assumption 5: Bounded costs: | Ct(s, a) |  M for all a  As
and all s  S
Assumption 6: The markov chain correponding to any
stationary deterministic policy contains a single recurrent
class. (Unichain)

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 Assumptions
Criterion:

where
PHR is the set of all possible policies.

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 Optimal policy
Main Theorem: Under Assumptions 1-6,
• There exists an optimal stationary deterministic policy.
• There exists a real g and a value function h(s) that satisfy the
following optimality equation:

• For any solutions (g, h) and (g’, h’) of the optimality equation:
(a) g = g’ is the optimal average reward;
(b) h(s) = h’(s) + k (translation closure);
• Any maximizer of the optimality equation is an optimal policy.

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 Relation between discounted and average cost MDP

• It can be shown that (why? online)

differential
cost
for any given state x0.

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Relation between discounted and average cost MDP

where x0 = any given reference state

h(s) : differential reward/cost

(starting from s vs x0)

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 Relation between discounted and average cost MDP

• Why

if limits interchangeable

If the discounted policy converges to average cost policy,

Blackwell optimality

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Computation of the optimal policy by LP
Recall the optimality equation:

This leads to the following LP for optimal policy computation

Remarks: Value iteration and policy iteration can also be

extended to the average cost case.

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 Computation of optimal policy
Value Iteration
1.Select any bounded value function h0 with h0(s0) = 0, let n =0
2. For each s S, compute

3.Repeat 2 until convergence.

4. For each s S, compute

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 Computation of optimal policy : Policy Iteration

1. Select any policy p0, let n =0

2. Policy evaluation: determine gp = stationary expected reward
and solve

3. Policy improvement:

Set n := n+1 and repeat 2-3 till convergence.

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 Extensions to unbounded cost
Theorem. Assume that the set of control actions is finite. Suppose
that there exists a finite constant L and some state x0 such that
|Vl(x) - Vl(x0)| ≤ L
for all states x and for all l (0,1). Then, for some sequence {ln}
converging to 1, the following limit exist and satisfy the optimality
equation.

Easy extension to policy iteration.

More conditions: Sennott, L.I. (1999) Stochastic Dynamic Programming and
the Control of Queueing Systems, New York: Wiley.

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 Why does it work : convergence of policy iteration
Theorem: If all policies generated by policy iteration are unichains,
then gn+1 ≥ gn.

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Continuous time Markov decision
processes

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 Assumptions

Assumption 1: The decision epochs T = R+

Assumption 2: The state space S is finite
Assumption 3: The action space As is finite for each s
Assumption 4: Stationary cost rates and transition rates;
C(s, a) and m(j |s, a) do not vary from decision epoch to
decision epoch

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 Assumptions
Criterion:

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 Example
• Consider a system with one machine producing one product. The
processing time of a part is exponentially distributed with rate p. The
demand arrive according to a Poisson process of rate d.
• state Xt = stock level, Action : at = make or rest

(make, p) (make, p) (make, p)

(make, p)

0 1 2 3
d d d
d

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 Uniformization
Any continuous-time Markov chain can be converted to a
discrete-time chain through a process called
« uniformization ».

Each Continuous Time Markov Chain is characterized by

the transition rates mij of all possible transitions.
The sojourn time Ti in each state i is exponentially
distributed with rate m(i) = Sj≠i mij, i.e. E[Ti] = 1/m(i)
Transitions different states are unpaced and
asynchronuous depending on m(i).

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 Uniformization
In order to synchronize (uniformize) the transitions at the same
pace, we choose a uniformization rate
g  MAX{m(i)}
« Uniformized » Markov chain with
•transitions occur only at instants generated by a common a
Poisson process of rate g (also called standard clock)
•state-transition probabilities
pij = mij / g
pii = 1 - m(i)/ g
where the self-loop transitions correspond to fictitious events.

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 Uniformization
CTMC
a Step1: Determine rate of the states
m(S1) = a, m(S2) = b
S1 S2
b
Step 2: Select an uniformization
Uniformized CTMC rate
g-a a
g-b g ≥ max{m(i)}
S1 S2
b Step 3: Add self-loop transitions to
states of CTMC.
DTMC by uniformization
1-a/g a/g 1-b/g
Step 4: Derive the corresponding
S1 S2 uniformized DTMC
b/g
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 Uniformization

Rates associated to states

m(0,0) = l1+l2
m(1,0) = m1+l2
m(0,1) = l1+m2
m(1,1) = m1
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 Uniformization

For Markov decision process, the uniformization rate

shoudl be such that

g  m(s, a) = SjS m(j|s, a)

for all states s and for all possible control actions a.

The state-transition probabilities of a uniformized Markov

decision process becomes:

p(j|s, a) = m(j|s, a)/ g

p(s|s, a) = 1- SjS m(j|s, a)/ g

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 Uniformization

(make, p) (make, p) (make, p)

(make, p)

0 1 2 3
d d d
d

Uniformized Markov decision process

at rate g = p+d
(make, p/g) (make, p/g) (make, p/g) (make, p/g) (make, p/g)

0 1 2 3
d/g d/g d/g d/g d/g

(not make, p/g) (not make, p/g) (not make, p/g) (not make, p/g)

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 Uniformization
Under the uniformization,
• a sequence of discrete decision epochs T1, T2, … is generated
where Tk+1 – Tk = EXP(g).
• The discrete-time markov chain describes the state of the system at
these decision epochs.
• All criteria can be easily converted.
continuous cost C(s,a)
per unit time fixed cost
fixed cost k(s,a, j)
K(s,a)
(s,a) j
EXP(g) EXP(g) EXP(g)

T0 T1 T2 T3 Poisson process at rate

g
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 Cost function convertion
for uniformized Markov chain
Discounted cost of a stationary policy p (only with continuous cost):

State change & action taken only at T k

Mutual independence of (Xk, ak) and

event-clocks (Tk, Tk+1)

Tk is a Poisson process at rate g

Average cost of a stationary policy p (only with continuous cost):

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 Cost function convertion
for uniformized Markov chain

Tk is a Poisson process at rate g, i.e. Tk = t1 + … + tk, ti = EXP(g)

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 Optimality equation: discounted cost case
Equivalent discrete time discounted MDP
• a discrete-time Markov chain with uniform transition rate g
• a discount factor l = g/(g+b)
• a stage cost given by the sum of
─ continuous cost C(s, a)/(b+g),
─ K(s, a) for fixed cost incurred at T0
─ lk(s,a,j)p(j|s,a) for fixed cost incurred at T1
Optimality equation

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 Optimality equation: average cost case
Equivalent discrete time average-cost MDP
• a discrete-time Markov chain with uniform transition rate g
• a stage cost given by C(s, a)/g whenever a state s is entered
and an action a is chosen.
Optimality equation for average cost per uniformized period:

where
• g = average cost/uniformized period,
• gg =average cost/time unit,
• h(s) = differential cost with respect to reference state s0 and h(s0) = 0

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 Optimality equation: average cost case
Multiply both side of the optimality equation by g leads to:

Alternative optimality equation 1:

where
• G = gg optimal average cost per time unit
• H(s) = modified differential cost with H(s) = g(V(s) – V(s0))

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 Optimality equation: average cost case
Alternative optimality equation 2: Hamilton-Jacobi-Bellman equation

where

• h(s) = differential cost with respect to a reference state s0

• m(j|s,a) = transition rate from (s,a) to j with

i.e. m(j|s,a) = gp(j|s,a) and m(s|s,a) = gp(s|s,a) - g

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 Example (continue)
Uniformize the Markov decision process with rate g = p+d

The optimality equation:

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 Example (continue)
From the optimality equation:

If V(s) is convex, then there exists a K such that :

V(s+1) –V(s) > 0 and the decision is not producing, for all s >= K and
V(s+1) –V(s) <= 0 and the decision is producing, for all s < K

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 Example (continue)
Convexity proved by value iteration

Proof by induction.
V0 is convex.
If Vn is convex with minimum
at s = K, then Vn+1 is convex.

s
K-1 K

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 Example (continue)
Convexity proved by value iteration
•Assume Vn is convex with minimum at s = K.
•Vn+1 is convex if
i.e. DU(s)  D U(s+1) where DU(s) = U(s+1) – U(s)
•True for s +1 < K-1 and s > K-1 by induction.
•Proof established if
DU(K-2)  D U(K-1)  DVn(K-1)  0
DU(K-1)  D U(K)  0  D Vn(K)
V(s+1) V(s)

s
K-1 K

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Condition for optimality of
monotone policy
(first order properties)

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 Monotone policy
Monotone policy
p(s) nondecreasing or nonincreasing in s

Question: When there exists an optimal monotone policy?

Answers: monotonicity (addressed here) and

convexity (addressed in the previous example)

Only finite-horizon case is considered but can be extented to

discounted and average cost.

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 Submodularity and Supermodularity
A function g(x, y) is said supermodular if for x+ ≥ x- and y+ ≥ y-,

It is said submodular if

Supermodularity  Increasing difference, i.e.

Submodularity  Decreasing difference

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 Submodularity and Supermodularity
Supermodular functions:

Property 1: If g(x,y) is supermodular (submodular), then

f(x) = min or max selection of the set argmaxy g(x,y) of maximizers

is monotone nondecreasing (nonincreasing) in x.

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 Dynamic Programming Operator
• DP operator T

equivalently

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DP Operator: monotonicity preservation

Property 2 T[Vt(s)] is nondecreasing (nonincreasing) if

1. r(s,a) is nondecreasing (nonincreasing) in s for all a
2. (snext|s,a) is nondecreasing in s for all a, k

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DP Operator: control monotonicity

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DP Operator: control monotonicity

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 Batch delivery model
• Customer demand Dt for a product arrives over time.
• State set S = {0, 1, …}: quantity of pending demand
• Action set A = {0=no delivery, 1=deliver all pending demand}
• Cost C(s,a) = hs(1-a) + aK
where
Submodularity
h = unit holding cost,
a(s) nondecreasing
K= fixed delivery cost
• Transition snext = s(1-a) + D where P(D=i) = pi, i=0, 1, …
GOAL: minimize the total cost

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 Batch delivery model

Min submodular  Max supermodular

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 A machine replacement model
• Machine deteriorates by a random number I of states per period
• State set S = {0, 1, …} from best to worse condition
• Action set A = {1=replace,0=not replace}
• Reward r(s,a) = R – h(s(1-a)) – aK
Supermodularity
R = fixed income per period,
a(s) nondecreasing
h(s) = nondecreasing operation cost
K= replacement cost
• Transition snext = s(1-a) + I where P(I=i) = pi, i=0, 1, …
GOAL: maximize the total reward

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A machine replacement model

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 A general framework for
value function property analysis

Based on G. Koole, “Structural results for the control of queueing systems

using event-based dynamic programming,” Queueing Systems 30:323-339,
1998

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Introduction: event operators

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 Introduction: a single server queue

• exponential server
• Poisson arrivals of which the admission can be controlled
• l: arrival rate
• m: service rate , l+m= 1
• c: unit rejection cost
• C(x): holding cost of x customers

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 Introduction: discrete-time queue

1: customer arrival rate, i.e. one customer per period

p: geometric service rate
x: queue length before admission decision and service completion

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One-dimension models : operators

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One-dimension models: operators

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One-dimension models: operators

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One-dimension models : operators

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One-dimension models : properties

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One-dimension models : property propagation

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One-dimension models : property propagation

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One-dimension models : property propagation
Proof of Lemma 1.
Tcosts and Tunif : results follow directly as increasingness and convexity are closed under convex combinations.
TA(1) : results follow directly, by replacing x by x + e1 in the inequalities.
TFS(1) : certain terms cancel out.
TD(1) : Increasingness follows as for TA(1), except if x1 = b1. In this case TD(1)f(x) = TD(1)f(x + e1). Also for the
convexity the only non-trivial case is x1 = b1. This reduces to f(x)  f(x + e1).
TMD(1) : Roughly the same arguments are used.
TAC(1) :

TCD(1) : similar proof as for TAC(1).

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One-dimension models : property propagation

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One-dimension models : property propagation

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 a single server queue
• l: arrival rate is l, m: service rate , l+m= 1
• c: unit rejection cost
• C(x): holding cost of x customers

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 discrete-time queue

1: customer arrival rate, p: geometric service rate

x: queue length before admission decision and service completion

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Production-inventory system

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Multi-machine production-inventory with preemption

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 Examples of Tenv(i)

Control policy keeps its structure but depends on the environment

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Examples

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Two-dimension models : operators

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Two-dimension models : properties

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Two-dimension models : properties
Conv Super SuperC
R R

+ LL
L R R L + L L

R L R R
R LL R R L

Inc Sub SubC

R

+ R
R L L R + L L

L R L R
L R L R

Super(i,j) + SuperC(i,j)  Conv(i)+Conv(j)

Super(i,j) + Conv(i) + Conv(j)  SubC(i,j)
Sub(i,j) + SubC(i,j)  Conv(i)+Conv(j)
Sub(i,j) + Conv(i) + Conv(j)  SuperC(i,j) Xiaolan Xie
2-dimension models : property propagation

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2-dimension models : property propagation

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2-dimension models : property propagation

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2-dimension models : property propagation

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2-dimension models : property propagation

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2-dimension models : property propagation

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2-dimension models : property propagation

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2-dimension models
Control structure under Super(1, 2) + SuperC(1, 2)

Super(1, 2) + SuperC(1, 2)  Conv(1) + Conv(2)

reject
Conv(1) TAC(1) : threshold admission in x1
Conv(2) TAC(2) : threshold admission in x2
Super(1, 2) TAC(1) : of threshold form in x2 admission
Super(1, 2) TAC(2) : of threshold form in x1

SuperC(1, 2) For TAC(1) : rejection in x+e2  rejection in x+e1

SuperC(1, 2) For TAC(2): rejection in x+e1  rejection in x + e2.

TAC(1) & TAC(2) : decreasing switching curve below which customers are admitted.
TCD(1) and TCD(2) can be seen as dual to TAC(1) and TAC(2), with corresponding
results.

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2-dimension models
Control structure under
Super(1, 2) + SuperC(1, 2)
queue1
SuperC(1, 2):
TR: an increasing switching curve above
(below) which customers are assigned to
queue 1 (2) queue2
SuperC(1, 2):
TCJ(1,2): the optimal control is increasing in
x1 and decreasing in x2, i.e. an increasing
switching curve, below which jockeying
occurs.

TCJ(2,1): an increasing switching curve, above

which jockeying occurs.

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2-dimension models : property propagation

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2-dimension models
Control structure under Super(1, 2)

Admission control for class 1 is decreassing in class 2 and vice vers.

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2-dimension models : property propagation

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2-dimension models
Control structure under Sub(1, 2) + SubC(1, 2)
Sub(1, 2) + SubC(1, 2)  Conv(1) + Conv(2)

Conv(i) threshold admission rule for TAC(i) in xi

Sub(1, 2) TAC(1) is of threshold form in x2
Sub(1, 2) TAC(2) is of threshold form in x1

SubC(1, 2)
TAC(1) (TAC(2)) : increasing switching curve above (below) which customers are
admitted.

Also the effects of TCD(i) amount to balancing in some sense the two queues.

The two queues “attract” each other.

TACF(1,2) has a decreasing switching curve below which customers are admitted

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2-dimension models
Control structure under Sub(1, 2) + SubC(1, 2)

TAC(1) TAC(2)

Admission No
queue1
Admission
No
queue2

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Examples: a queue served by two servers

• A common queue served by two servers (1= fast, 2=slow)

• Poisson arrivals to the queue
• Exponential servers but with different mean service times
• Goal: minimizes the mean sojourn time

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Examples: a queue served by two servers

TCJ(1,2)

To slow

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Examples: production line with Poisson demand

• M1 feeds buffers 1, M2 transfers to buffer 2

• Poisson demand filled from queue 2
• Production rate control of both machines

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Examples: tandem queues with Poisson demand

x2

M1 produce M2 produce
x1

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Examples: admission control of tandem queues

• Two tandem queues: queue 1 feeds queue 2

• Convex holding cost hi(xi)
• Service rate control of both queues
• Admission control of arrival to queue 1

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Examples: cyclic tandem queues

• Two cyclic queues: queue 1 feed queue 2, vice versa

• Convex holding cost hi(xi)
• Service rate control of both queues

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Multi-machine production-inventory with non preemption

AC(1)

AC(2)

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Examples: stochastic knapsack

• Packing a knapsack of integer volume B with objects

from 2 different classes to maximize profit
• Poisson arrivals

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Examples

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