Abstract
This paper proposes an extensive application of the "up and down" method, which was originally used as a means of analyzing the sensitivity data. The decrement of the production rate due to a conscious plan truncates possible demand and, in consequence, may lead to misjudgment of future demand. An optimal decision rule of production planning in the above case is developed by the application of the "up and down" method and by the use of the criterion that the total expected cost based on the distorted demand information shall be minimized. (A numerical example follows.)
