Optimal order quantity by maximising expected utility for the newsboy model

Reasonable communication and cooperation between enterprises are helpful for the efficient operation of a supply chain. To explore the maximum utility of an entire supply chain, we propose a supplier-manufacturer-seller supply-chain game decision-making model. We use the model as the fitness function of a genetic algorithm that calculates the optimal solution and optimizes the total utility parameters. We analyze the theoretical and practical properties of the supply-chain optimization process and implement it in MATLAB, which provides quantitative support and useful references for making business decisions and optimally managing a supply chain.

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A comparative study to find the optimal ordering quantity of the risk-neutral and risk-averse newsvendor

Mohan

Ota

Iqbal

2023

YUGOSLAV J OPERATION

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In the classical newsvendor problem, it is considered that the newsvendor is risk-neutral and the Optimal Ordering Quantity (OOQ) was found which maximizes the newsvendor expected profit. In the real world, different investors have different attitudes towards risk. Accordingly, this paper considers the utility function which is commonly being used to model the attitude of the investor who makes the investment decision to maximize his expected utility instead of expected profit. This study considers the quadratic utility function and demonstrates that it can be used to describe the riskaverse as well as a risk-neutral investor with some conditions. Finally, by considering the risk profile of the investor at different levels of investor initial wealth, we have developed a method to determine the OOQ which maximizes the expected utility. From the numerical examples, it is clear that the OOQ and hence the expected utility varies depending on an investor?s attitude toward the risk and investment decision. At different levels of initial wealth, the attitudes toward the risk of the investors are different and the sensitivity analysis demonstrates how an investor can choose the initial wealth and OOQ to maximize his expected utility.

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Optimal order quantity by maximising expected utility for the newsboy model

Cited by 3 publications

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Strategic Evolution and Adaptive Responses of Chinese International General Contractors under the Belt and Road Initiative: Insights from Social Network Analysis

Strategic Evolution and Adaptive Responses of Chinese International General Contractors under the Belt and Road Initiative: Insights from Social Network Analysis

Design and Application of Genetic Algorithm Based on Signal Game and Newsboy Model for Optimizing Supply Chain

A comparative study to find the optimal ordering quantity of the risk-neutral and risk-averse newsvendor

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