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How much should we stock in anticipation of three periods of uncertain demand:
Period 1: The main, profitable period, e.g., Christmas.
Period 2: The mark down period, when margins are slim, e.g. January.
Period 3: Dispose of, by whatever means necessary, any product still left over.
We want to maximize expected profit over the three periods.
When we choose the amount to stock before period 1, we want to take into account the Mark Down and dispose periods;