Target market selection and marketing effort under uncertainty: The selective newsvendor
We consider a firm that markets, procures, and delivers a good with a single selling season in a number of different markets. The price for the good is market-dependent, and each market has an associated demand distribution, with parameters that depend on the amount of marketing effort applied. Given long procurement lead-times, the firm must decide which markets it will serve prior to procuring the good. We develop a profit maximizing model to address the firm's integrated market selection, marketing effort, and procurement decisions. The model implicitly accounts for inventory pooling across markets, which reduces safety stock costs but increases model complexity. The resulting model is a nonlinear integer optimization problem, for which we develop specialized solution methods. For the case in which budget constraints exist, we provide a novel solution approach that uses a tailored branch-and-bound algorithm. Our approach solves a broad range of 3000 test instances in an average of less than 2 seconds, significantly outperforming a leading commercial global optimization solver.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:189:y:2008:i:3:p:987-1003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.