Dynamic programming is sequential decision making technique. It is a recursive technique we come from final stage to initial stages. A decision taken at one stage influences the decisions in other stages. dynamic programming technique is useful in a large number of multi period business problems.
Terms in dynamic programming:
- Stage: Period or logical sub problem.
- State variables: Possible initial situations or conditions.
- Decision variables: Alternatives that exist at each stage.
- Decision criteria: Statement concerning objectives of a problem.
- Optimum policy: A set of decision rules developed as a result of decision criterion that gives optimal decision.