I'm working on a model for inventory management. I'm trying to decide for each unit if it is worth holding, or if it should be liquidated at a cost $x$.
I'm wondering about the argument that marginal holding cost for any unit are 0, because the warehouse is there, the unit is there, etc., so there is no real cost of holding an additional unit in the warehouse other than cost of capital, with the exception that the last units that fit in start creating opportunity cost.
That seems intuitively right, but brings me to the problem that I have the incentive of keeping stock with extremely high reaches - which seems intuitively wrong.
Am I missing something? Is it "mathematically" correct to assume the first unit in the warehouse has all the marginal cost of the entire warehouse cost? How can I model this correctly? Is there literature on this?