Summary: ISyE 4803 Ayhan
Summer 2010
Homework 3
1. Consider problem of 1 of Homework 2 where a company reviews the state of one of its
important products on an annual basis and decides whether it is successful (state 1) or
unsuccessful (state 2). The company must then decide whether or not to advertise the product
to further promote the sales. The matrices P1 and P2 given below provide the transition
probabilities with and without advertisement during any year. The associated returns are
given by the matrices R1 and R2. Find the optimal decisions over an infinite horizon with
discount factor = 0.6 using policy iteration.
P1 =
0.9 0.1
0.6 0.4
P2 =
0.7 0.3
0.2 0.8
R1 =
2 -1
1 -3
R2 =

Source: Ayhan, Hayriye - School of Industrial and Systems Engineering, Georgia Institute of Technology

Collections: Engineering