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On demand uncertainty in the newsvendor model

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  • Andrew Butters, R.

Abstract

I provide three comparative statics involving the level of demand uncertainty for the newsvendor model, two of which lead to robust predictions. I show that for distributions of demand that are greater in the dispersive order, both the expected (censored) sales and share of inventory sold fall. These monotone comparative statics occur despite the lack of one for the (optimal) inventory choice.

Suggested Citation

  • Andrew Butters, R., 2019. "On demand uncertainty in the newsvendor model," Economics Letters, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:ecolet:v:185:y:2019:i:c:s016517651930374x
    DOI: 10.1016/j.econlet.2019.108746
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    References listed on IDEAS

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    Cited by:

    1. Samuel N. Kirshner & Zhaolin Li, 2022. "Supply chain contracting with competing regretful retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2196-2211, September.

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    More about this item

    Keywords

    Demand uncertainty; Newsvendor model; Dispersive order; Inventory; Monotone comparative statics; Censored demand;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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