Robust multi-market newsvendor models with interval demand data
AbstractWe present a robust model for determining the optimal order quantity and market selection for short-life-cycle products in a single period, newsvendor setting. Due to limited information about demand distribution in particular for short-life-cycle products, stochastic modeling approaches may not be suitable. We propose the minimax regret multi-market newsvendor model, where the demands are only known to be bounded within some given interval. In the basic version of the problem, a linear time solution method is developed. For the capacitated case, we establish some structural results to reduce the problem size, and then propose an approximation solution algorithm based on integer programming. Finally, we compare the performance of the proposed minimax regret model against the typical average-case and worst-case models. Our test results demonstrate that the proposed minimax regret model outperformed the average-case and worst-case models in terms of risk-related criteria and mean profit, respectively.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 212 (2011)
Issue (Month): 2 (July)
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Web page: http://www.elsevier.com/locate/eor
Risk analysis Newsvendor problem Minimax regret Uncertainty modeling;
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"A maximum entropy approach to the newsvendor problem with partial information,"
2011/14, Department of Business and Management Science, Norwegian School of Economics.
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