We extend the classical newsvendor problem by introducing a downside risk constraint from the perspective of inventory control. At the beginning of a replenishment period the newsvendor will place an order, then he wi...We extend the classical newsvendor problem by introducing a downside risk constraint from the perspective of inventory control. At the beginning of a replenishment period the newsvendor will place an order, then he will review the inventory level at the end of the period. If the inventory level is positive then he will bear the holding cost and if the inventory level is negative then he will bear the backorder cost. The optimal order quantity has a simple form. We analyze the form of the optimal order quantity when we restrict that the probability that the cost level is larger than or equal to a fixed cost constant is less than a fixed value of probability. At last, we analyze the case that the fixed cost constant is equal to the expected cost.展开更多
We consider an extension of the standard newsvendor problem by allowing for multiple classes of customers. The product is first sold to customers with the highest priority, and the remaining units (if any) are sold at...We consider an extension of the standard newsvendor problem by allowing for multiple classes of customers. The product is first sold to customers with the highest priority, and the remaining units (if any) are sold at a discounted price to customers in decreasing order of priority until all classes of customers have been served, limited only by the available stock. Unsold items, if any, have a salvage value. The demands of different priority customers are independent random variables with known probability distributions. The problem is to find the purchase quantity that maximizes the expected profit. We show that this problem actually reduces to the standard newsvendor problem with the demand distribution being a mixture of the input demand distributions. Since this mixture of distributions is typically hard to handle analytically, we propose a simple general heuristic which can be implemented using different types of distributions. Some of these implementations produce near optimal solutions. We tested these implementations for the case of two demand classes of customers and found that they outperform previously published heuristics in almost all instances. We suggest applications for this model in the Chinese pharmaceutical industry, apparel industry, and perishable goods among others. We also propose an extension involving shortage cost.展开更多
In this paper, we consider a newsvendor model in which a risk-averse manager faces a stochastic price-dependent demand in either an additive or a multiplicative form. An emergency purchase option is allowed after the ...In this paper, we consider a newsvendor model in which a risk-averse manager faces a stochastic price-dependent demand in either an additive or a multiplicative form. An emergency purchase option is allowed after the realization of demand to satisfy the units that are short. By adopting Conditional value-at-risk (CVaR) as the decision criterion, we aim to investigate the optimal pricing and ordering decisions, and the effects of parameter changes in such a setting. We provide sufficient conditions for the uniqueness of the optimal policy for both demand models. We perforl~, comparative statics analysis to show how the optimal pricing and ordering decision behaves when changing parameters. We also compare our results with those of the newsvendor with a general utility function and with CVaR criterion under lost sales assumption. Our key results include: (i) For both demand models, the optimal selling price is decreasing in risk aversion. Hence, the optimal price of a risk-averse newsvendor is not greater than the optimal price of a risk-neutral newsvendor. (it) In contrary to the lost sales case, for the multiplicative demand model, the optimal order quantity may not be monotonic in risk aversion. Consequently, the optimal risk-averse order quantity may be lower or higher than the optimal risk- neutral counterpart. (iii) For the additive model, the optimal order quantity is strictly increasing in the emergency purchase price, while for the multiplicative model the optimal order quantity has no such a monotonic property. Some numerical examples are conducted to verify our claims and gain more insights about the risk-averse decision-making behaviors.展开更多
For seasonal products, the retailers usually launch various marketing ettorts, llKe aaverusmg tmu promotion, to promote them in a selling season. While facing large demand from the customers, one should take the capac...For seasonal products, the retailers usually launch various marketing ettorts, llKe aaverusmg tmu promotion, to promote them in a selling season. While facing large demand from the customers, one should take the capacity constraint and outsotlrcing into consideration. Considering the shorten life cycles of most products, in this paper we adopt the traditional newsvendor model to investigate the optimal marketing effort along with optimal order quantity. We address the risk aversion issue and characterize the influence of the sellers' risk propensity with CVaR criterion, and we develop an effective algorithm to obtain the optimal strategy. The impact of sellers' risk propensity on the performance of the system is illustrated via numerical examples, The innovation of this paper is threefold. First, the optimal joint strategy of the marketing effort and order quantity is investigated and an efficient algorithm to find the optimal strategy is developed. Second, the capacity constraint option and an outsourcing strategy are studied jointly for excess products. Finally, the risk propensity of the seller and its influence are investigated by using the CVaR criterion, through which we obtain some new managerial insights.展开更多
This paper investigates the ordering policy for the newsvendor problem with customer balking and penalties for balking and stockout. Our analysis is based on the assumption that only the mean and the variance of the d...This paper investigates the ordering policy for the newsvendor problem with customer balking and penalties for balking and stockout. Our analysis is based on the assumption that only the mean and the variance of the demand distribution are known. In contrast to the existing research, we provide a new tradeoff tool as a replacement of the traditional one to weigh the holding cost and the goodwill cost segment: the balking penalty cost and the stockout penalty cost. Specifically, in addition to the stockout penalty, we also introduce the balking penalty, provide a new proof of the optimality of robust ordering policy to guarantee that the lower bound of expected profit obtained by us is tight, and get an robust optimal order quantity which is an exact solution but not an approximate one as before. Numerical experiments are conducted to illustrate the effect of penalties for balking and stockout.展开更多
Based on the newsvendor setting,many behavioral models are proposed to predict the biases of decision makers in inventory management.Recently,Nagarajan and Shechter(Manag Sci 60:1057–1062,2014)claimed that prospect t...Based on the newsvendor setting,many behavioral models are proposed to predict the biases of decision makers in inventory management.Recently,Nagarajan and Shechter(Manag Sci 60:1057–1062,2014)claimed that prospect theory cannot explain the consistent empirical findings.However,it is noticed that their model is a special case of the general prospect theorymodel.In this note,we showthat the general prospect theory model may be powerful in predicting the preferences of decision makers in inventory management.展开更多
The manner in which economic outcomes are coded in a value function is critical because it has substantial influence on the evaluation of risky choices.In this paper,we formulate multiple mental accounts in a nonlinea...The manner in which economic outcomes are coded in a value function is critical because it has substantial influence on the evaluation of risky choices.In this paper,we formulate multiple mental accounts in a nonlinear value function and propose a newsvendor problem with mental accounting to predict and explain pull-to-center phenomenon.We show that the distinctive predictions of the proposed model come from the value function with mental accounting.We identify the individual and combined effects of loss aversion,risk aversion,and risk seeking on shaping newsvendor ordering behavior.Our work demonstrates that prospect theory can explain the decision bias and ordering behavior observed in newsvendor experiments.We also provide some additional insights to explain the studies in the literature.展开更多
In this paper,a multi-product newsvendor problem is formulated as a random nonlinear integrated optimization model by taking into consideration the selling price,the producing and outsourcing quantities,and the nonlin...In this paper,a multi-product newsvendor problem is formulated as a random nonlinear integrated optimization model by taking into consideration the selling price,the producing and outsourcing quantities,and the nonlinear budget constraint.Different from the existing models,the demands of products depend on the prices,as well as being timevarying due to random market fluctuation.In addition,outsourcing strategy is adopted to deal with possible shortage caused by the limited capacity.Consequently,the constructed model is involved with joint optimization of the producing and outsourcing quantities,and the selling prices of all the products.For this model with continuous random demands,we first transform it into a nonlinear programming problem by expectation method.Then,an efficient algorithm,called the feasible-direction-based spectral conjugate gradient algorithm,is developed to find a robust solution of the model.By case study and sensitivity analysis,some interesting conclusions are drawn as follows:(a)Budget is a critical constraint for optimizing the decision-making of the retailer,and there exist different threshold values of the budget for the substitute and complementarity scenarios.(b)The price sensitivity matrix seriously affects the maximal expected profit mainly through affecting the optimal outsourcing quantity.展开更多
基金Supported by the National Natural Science Foundation of China (70471034, A0324666)
文摘We extend the classical newsvendor problem by introducing a downside risk constraint from the perspective of inventory control. At the beginning of a replenishment period the newsvendor will place an order, then he will review the inventory level at the end of the period. If the inventory level is positive then he will bear the holding cost and if the inventory level is negative then he will bear the backorder cost. The optimal order quantity has a simple form. We analyze the form of the optimal order quantity when we restrict that the probability that the cost level is larger than or equal to a fixed cost constant is less than a fixed value of probability. At last, we analyze the case that the fixed cost constant is equal to the expected cost.
文摘We consider an extension of the standard newsvendor problem by allowing for multiple classes of customers. The product is first sold to customers with the highest priority, and the remaining units (if any) are sold at a discounted price to customers in decreasing order of priority until all classes of customers have been served, limited only by the available stock. Unsold items, if any, have a salvage value. The demands of different priority customers are independent random variables with known probability distributions. The problem is to find the purchase quantity that maximizes the expected profit. We show that this problem actually reduces to the standard newsvendor problem with the demand distribution being a mixture of the input demand distributions. Since this mixture of distributions is typically hard to handle analytically, we propose a simple general heuristic which can be implemented using different types of distributions. Some of these implementations produce near optimal solutions. We tested these implementations for the case of two demand classes of customers and found that they outperform previously published heuristics in almost all instances. We suggest applications for this model in the Chinese pharmaceutical industry, apparel industry, and perishable goods among others. We also propose an extension involving shortage cost.
基金supported by the Social Science Foundation of the Ministry of Education of China(Grant No.07JA630015)the Natural Science Foundation of China(Grant No.70901059)Wuhan University Science Foundation for Youths Scholars(Grant No.105-275171)
文摘In this paper, we consider a newsvendor model in which a risk-averse manager faces a stochastic price-dependent demand in either an additive or a multiplicative form. An emergency purchase option is allowed after the realization of demand to satisfy the units that are short. By adopting Conditional value-at-risk (CVaR) as the decision criterion, we aim to investigate the optimal pricing and ordering decisions, and the effects of parameter changes in such a setting. We provide sufficient conditions for the uniqueness of the optimal policy for both demand models. We perforl~, comparative statics analysis to show how the optimal pricing and ordering decision behaves when changing parameters. We also compare our results with those of the newsvendor with a general utility function and with CVaR criterion under lost sales assumption. Our key results include: (i) For both demand models, the optimal selling price is decreasing in risk aversion. Hence, the optimal price of a risk-averse newsvendor is not greater than the optimal price of a risk-neutral newsvendor. (it) In contrary to the lost sales case, for the multiplicative demand model, the optimal order quantity may not be monotonic in risk aversion. Consequently, the optimal risk-averse order quantity may be lower or higher than the optimal risk- neutral counterpart. (iii) For the additive model, the optimal order quantity is strictly increasing in the emergency purchase price, while for the multiplicative model the optimal order quantity has no such a monotonic property. Some numerical examples are conducted to verify our claims and gain more insights about the risk-averse decision-making behaviors.
基金partially supported by the National Science Foundation of China(Nos. 11171019 and 71390334)the Program for New Century Excellent Talents in University (No.NCET-11-0568)
文摘For seasonal products, the retailers usually launch various marketing ettorts, llKe aaverusmg tmu promotion, to promote them in a selling season. While facing large demand from the customers, one should take the capacity constraint and outsotlrcing into consideration. Considering the shorten life cycles of most products, in this paper we adopt the traditional newsvendor model to investigate the optimal marketing effort along with optimal order quantity. We address the risk aversion issue and characterize the influence of the sellers' risk propensity with CVaR criterion, and we develop an effective algorithm to obtain the optimal strategy. The impact of sellers' risk propensity on the performance of the system is illustrated via numerical examples, The innovation of this paper is threefold. First, the optimal joint strategy of the marketing effort and order quantity is investigated and an efficient algorithm to find the optimal strategy is developed. Second, the capacity constraint option and an outsourcing strategy are studied jointly for excess products. Finally, the risk propensity of the seller and its influence are investigated by using the CVaR criterion, through which we obtain some new managerial insights.
文摘This paper investigates the ordering policy for the newsvendor problem with customer balking and penalties for balking and stockout. Our analysis is based on the assumption that only the mean and the variance of the demand distribution are known. In contrast to the existing research, we provide a new tradeoff tool as a replacement of the traditional one to weigh the holding cost and the goodwill cost segment: the balking penalty cost and the stockout penalty cost. Specifically, in addition to the stockout penalty, we also introduce the balking penalty, provide a new proof of the optimality of robust ordering policy to guarantee that the lower bound of expected profit obtained by us is tight, and get an robust optimal order quantity which is an exact solution but not an approximate one as before. Numerical experiments are conducted to illustrate the effect of penalties for balking and stockout.
基金This work is supported by the National Natural Science Foundation of China(Nos.71031005 and 71201134).
文摘Based on the newsvendor setting,many behavioral models are proposed to predict the biases of decision makers in inventory management.Recently,Nagarajan and Shechter(Manag Sci 60:1057–1062,2014)claimed that prospect theory cannot explain the consistent empirical findings.However,it is noticed that their model is a special case of the general prospect theorymodel.In this note,we showthat the general prospect theory model may be powerful in predicting the preferences of decision makers in inventory management.
基金the National Natural Science Foundation of China under Grant Nos.71872012 and 71372018the Key Research Program of Beijing Social Science Foundation under Grant No.15JDJGA021+6 种基金the International Clean Energy Talents Program of China Scholarship Council underunder Grant Nos.Liujinfa[2017]5047 and Liujinfa[2018]5023the Special Fund of Beijing Municipal Commission of Education under Grant No.20162139016the Ministry of Education of Humanities and Social Science Project under Grant Nos.l9YJC630044 and 19YJC630035the National Natural Science Foundation of Zhejiang Province under Grant No.LY18G010016Zhoushan Science and Technology Project under Grant No.2017C41018the Foundation of Zhejiang Educational Committee under Grant No.Y201840337the Startup Foundation of Zhejiang Ocean University under Grant Nos.11085090318 and 11085090418.
文摘The manner in which economic outcomes are coded in a value function is critical because it has substantial influence on the evaluation of risky choices.In this paper,we formulate multiple mental accounts in a nonlinear value function and propose a newsvendor problem with mental accounting to predict and explain pull-to-center phenomenon.We show that the distinctive predictions of the proposed model come from the value function with mental accounting.We identify the individual and combined effects of loss aversion,risk aversion,and risk seeking on shaping newsvendor ordering behavior.Our work demonstrates that prospect theory can explain the decision bias and ordering behavior observed in newsvendor experiments.We also provide some additional insights to explain the studies in the literature.
基金supported by National Natural Science Foundation of China(Grant No.71671190)。
文摘In this paper,a multi-product newsvendor problem is formulated as a random nonlinear integrated optimization model by taking into consideration the selling price,the producing and outsourcing quantities,and the nonlinear budget constraint.Different from the existing models,the demands of products depend on the prices,as well as being timevarying due to random market fluctuation.In addition,outsourcing strategy is adopted to deal with possible shortage caused by the limited capacity.Consequently,the constructed model is involved with joint optimization of the producing and outsourcing quantities,and the selling prices of all the products.For this model with continuous random demands,we first transform it into a nonlinear programming problem by expectation method.Then,an efficient algorithm,called the feasible-direction-based spectral conjugate gradient algorithm,is developed to find a robust solution of the model.By case study and sensitivity analysis,some interesting conclusions are drawn as follows:(a)Budget is a critical constraint for optimizing the decision-making of the retailer,and there exist different threshold values of the budget for the substitute and complementarity scenarios.(b)The price sensitivity matrix seriously affects the maximal expected profit mainly through affecting the optimal outsourcing quantity.