The Newsboy Problem under Alternative Optimization Objectives

Lau, Hon‐Shiang

doi:10.2307/2580826

Cited by 90 publications

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“…Compared to the optimal solutions for other models, it gives the lowest expected profit, standard deviation, expected loss, conditional expected loss, and VaR. This is because the optimal solution of the attainment probability model, τ /(p − c) (Lau 1980), is one such that the profit can never exceed τ . This is very conservative in nature.…”

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confidence: 99%

The Impact of a Target on Newsvendor Decisions

Chen

Long

Perakis

2015

M&SOM

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Goal achieving is a commonly observed phenomenon in practice, and it plays an important role in decision making. In this paper we investigate the impact of a target on newsvendor decisions. We take into account the risk and model the effect of a target by maximizing the satisficing measure of a newsvendor's profit with respect to that target. We study two satisficing measures: i) CVaR (Conditional Value at Risk) satisficing measure that evaluates the highest confidence level of CVaR achieving the target; and ii) entropic satisficing measure that assesses the smallest risk tolerance level under which the certainty equivalent for exponential utility function achieves the target. For both satisficing measures, we find that the optimal ordering quantity increases with the target level. We determine an optimal order quantity for a target based newsvendor and charactize its properties with respect to, for example, product's profit margin.

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confidence: 99%

The Impact of a Target on Newsvendor Decisions

Chen

Long

Perakis

2015

M&SOM

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“…For Model 1, using results from Lau [34], the authors showed that the constraint P rob(Π ≥ T ) ≥ θ, where Π is the actual profit, T is the target profit level, and θ is the predetermined risk level, actually imposes another feasible condition on Q associated with w i , i.e.,…”

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confidence: 99%

“…For Model 2, the decision variable Q has the same feasible interval as for Model 1 for each w i and closed-form expression for the optimal solution can be derived. For the other two models with positive shortage cost, again using the results from Lau [34], the constraint on the risk level can be replaced by the inequality F (D 2i − F (D 1i )) ≥ θ, where Burnetas, Gilbert and Smith [14] addressed a pricing-policy design problem of a profit-maximizing supplier that has less demand information than the newsvendor-type buyer does. The optimal all-units discount and the optimal incremental discount were also contrasted in terms of the effectiveness of increasing the supplier's expected profit in this paper.…”

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confidence: 99%

“…Lau [34] provided solution procedures for solving the newsvendor problems under two alternative optimization objectives, maximizing expected utility and maximizing the probability of the classic newsvendor problem always serves as an upper bound on the optimal order quantity in this scenario. Besides, he suggested determining the optimal solution value numerically due to the complexity of the first-order condition.…”

Section: Buyer Risk Profilementioning

confidence: 99%

“…Anvari [4] argued that the mean-variance approach proposed in Lau [34] may not apply to a decision maker facing with multiple investment options since the effect of covariance cannot be captured by the mean-variance approach. The author hence suggested the use of the capital asset pricing model (CAPM) in the inventory models and thus optimizing from the perspective of the shareholders, instead of the managers, to avoid agency problem.…”

Section: Buyer Risk Profilementioning

confidence: 99%

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The newsvendor problem: Review and directions for future research

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Vakharia

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414

173

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In this paper, we review the contributions to date for analyzing the newsvendor problem.Our focus is on examining the specific extensions for analyzing this problem in the context of modeling customer demand, supplier costs, and the buyer risk profile. More specifically, we analyze the impact of market price, marketing effort, and stocking quantity on customer demand; how supplier prices can serve as a coordination mechanism in a supply chain setting; integrating alternative supplier pricing policies within the newsvendor framework; and how the buyer's risk profile moderates the newsvendor order quantity decision. For each of these areas, we summarize the current literature and develop extensions. Finally, we also propose directions for future research.

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Managing seasonality in West African informal urban vegetable markets: The role of household relations

Bellwood-Howard

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Donkoh

et al. 2021

J of Intl Development

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Seasonality influences African informal agricultural markets, but existing literature inadequately explores its interactions with market actors' social relations and livelihood outcomes. Thus, agricultural commercialisation policy ineffectively supports such actors to manage seasonality. Across Bamako, Ouagadougou and Tamale, we conducted interviews, focus group discussions, and a survey of farmer and marketer profits across seasons. Hot, dry season lettuce transactions performed by marketers are more likely to make profit. Farmers and marketers rely on household and community relations and reproduce gendered skills to optimise profit and secure future income streams. Policies supporting household reproduction, and infrastructure, may best support their marketing activity.

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The Newsboy Problem under Alternative Optimization Objectives

Cited by 90 publications

References 0 publications

The Impact of a Target on Newsvendor Decisions

The Impact of a Target on Newsvendor Decisions

The newsvendor problem: Review and directions for future research

Managing seasonality in West African informal urban vegetable markets: The role of household relations

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