Optimality of two-sided (σ,Σ)(σ,Σ) policy in capacity expansion problem

Ye and Duenyas (2007) consider a finite-horizon capacity investment problem with two-sided fixed-capacity adjustment costs. In this note, we consider Ye and Duenyas’s capacity investment problem over a horizon of infinite periods with stationary parameters. We show that the optimal policy has a two-sided (σ,Σ)(σ,Σ) structure and the parameters in the optimal policy can be determined by the single-period profit function.