An order-revenue inventory model with returns and sudden obsolescence

This paper introduces an EOQ-like state-dependent inventory model with returns and sudden obsolescence. Returns arrive according to a MAP process governed by the underlying Markov chain. Additionally, the system is totally obsoleted at stationary renewal times. Hitting level 0 yields an order of size Q. We assume order, loss, and shortage costs in addition to revenue. By applying hitting-time transforms and martingales we derive the cost functionals under the discounted criterion. Numerical results, insights, and a comparative study are provided.