Abstract
Recently, K-L Hou and L-C Lin have discussed an inventory system with investment to reduce yield variability and set-up cost. In their model, the relationships between the reduction in set-up cost and yield variability are formulated using logarithmic investment functions. Also, the capital investment is supposed to limitless. In our model, we tried to extend their model If we can use the capital limitlessly, we may gain the optimal solutions easily. Our problem presents the situation where the amount of capital has a limitation. A mathematical solution method we propose here is based on Karush-Kuhn-Tucker condition and complementarity.
