Maximization of net revenue per unit of physical output in Markov decision processes

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Abstract
A new criterion of optimality in Markov decision processes is discussed. The objective is to maximize the average net revenue per unit of physical output (or input). The criterion is relevant in some production models where a limitation is imposed on the physical output (production quota) or on an input factor (scarce resources). An obvious application is in dairy cow replacement models under milk quotas. Iteration cycles are presented for ordinary completely ergodic Markov decision processes and for hierarchic Markov processes. The consequences of the new criterion are illustrated by a numerical example.

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