Mixed contracts for the newsvendor problem with real options and discrete demand
AbstractIn this paper we consider the newsvendor model with real options under discrete demand. We consider a mixed contract where the retailer can order a combination of q units subject to the conditions in a classical newsvendor contract and Q real options on the same items. We provide a closed form solution to this mixed contract when the demand is discrete and study some of its properties. In particular we demonstrate that a mixed contract may be superior to a real option contract when a manufacturer has a bound on how much variance she is willing to accept.
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Bibliographic InfoArticle provided by Elsevier in its journal Omega.
Volume (Year): 41 (2013)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description
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