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Monotone Forecasts

Çar Haksöz, Sridhar Seshadri

Department of Information, Operations, and Management Sciences, Stern School of Business, New York University, New York, New York 10012
Department of Information, Operations, and Management Sciences, Stern School of Business, New York University, New York, New York 10012
chaksoz{at}stern.nyu.edu
sseshadr{at}stern.nyu.edu

In this paper we provide necessary and sufficient conditions for the distribution of demand in the future to be stochastically increasing in the demand that has been observed in the past. We base our analysis on the multiperiod inventory model examined by Eppen and Iyer (1997). In the process of establishing the necessary and sufficient conditions we develop a new property called the sequential monotone likelihood ratio property.

Subject classifications: inventory/production; policies; probability; distribution comparisons; stochastic model applications; forecasting; applications.
History: Received July 2001; revision received November 2002; accepted April 2003.