The equilibrium equations for the lost sales (r,q) policy with inventory level dependent demand and multiple outstanding orders

We develop the equilibrium equations for the a model generalizing the continuous review (r, q) lost-sales model with constant lead time, multiple outstanding orders and unit Poisson demand. Demand rate is allowed to depend on inventory level. The model is solved for the case r=2,q=2 as well as the general case q=1. An application is given for a system involving lateral transshipments.