The newsvendor problem with normal, worst-case and binomial distribution of demand: Managerial implications with examples
Tomasz Brzęczek,
Dušan Hrabec
Abstract:The paper examines the newsvendor problem with demand distributions commonly used in the literature. Optimal order convergence is checked numerically. An important contribution is that the expected profits differ considerably in nominal and relative terms when the profit-loss ratio is low valued while the demand variability is at least moderate. Missed expected profit reaches even 10% of total order cost for a mark-up that equals to the worst case break even one. The optimal order quantities are compared to co… Show more
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