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Technical Note---A Note on “The Censored Newsvendor and the Optimal Acquisition of Information”

Author

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  • Alain Bensoussan

    (International Center for Decision and Risk Analysis, School of Management, University of Texas at Dallas, Richardson, Texas 75083)

  • Metin Çakanyıldırım

    (School of Management, University of Texas at Dallas, Richardson, Texas 75083)

  • Suresh P. Sethi

    (Center for Intelligent Supply Networks, School of Management, University of Texas at Dallas, Richardson, Texas 75083)

Abstract

This paper revisits the finite-horizon model of a censored newsvendor by Ding et al. [Ding, X., M. L. Puterman, A. Bisi. 2002. The censored newsvendor and the optimal acquisition of information. Oper. Res. 50 517--527]. An important result claimed there without a proper proof is that the myopic order quantity is always less than or equal to the optimal order quantity. Lu et al. [Lu, X., J. S. Song, K. Zhu. 2008. Analysis of perishable inventory systems with censored demand data. Oper. Res. 56 (4) 1034--1038.] supplied a correct proof of the result. We analyze the same model using the interesting concept of the unnormalized probability, which simplifies the dynamic programming equation considerably and facilitates the proof of the claim. Moreover, it produces the proof of the existence of an optimal solution for an infinite-horizon setting of the problem.

Suggested Citation

  • Alain Bensoussan & Metin Çakanyıldırım & Suresh P. Sethi, 2009. "Technical Note---A Note on “The Censored Newsvendor and the Optimal Acquisition of Information”," Operations Research, INFORMS, vol. 57(3), pages 791-794, June.
    • Handle: RePEc:inm:oropre:v:57:y:2009:i:3:p:791-794
    DOI: 10.1287/opre.1080.0609
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    References listed on IDEAS

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    1. Arnab Bisi & Maqbool Dada, 2007. "Dynamic learning, pricing, and ordering by a censored newsvendor," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(4), pages 448-461, June.
    2. Xiangwen Lu & Jing-Sheng Song & Kaijie Zhu, 2008. "Analysis of Perishable-Inventory Systems with Censored Demand Data," Operations Research, INFORMS, vol. 56(4), pages 1034-1038, August.
    3. Alain Bensoussan & Metin Çakanyıldırım & Suresh P. Sethi, 2007. "A Multiperiod Newsvendor Problem with Partially Observed Demand," Mathematics of Operations Research, INFORMS, vol. 32(2), pages 322-344, May.
    4. Li Chen & Erica L. Plambeck, 2008. "Dynamic Inventory Management with Learning About the Demand Distribution and Substitution Probability," Manufacturing & Service Operations Management, INFORMS, vol. 10(2), pages 236-256, May.
    5. Xiaomei Ding & Martin L. Puterman & Arnab Bisi, 2002. "The Censored Newsvendor and the Optimal Acquisition of Information," Operations Research, INFORMS, vol. 50(3), pages 517-527, June.
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    Cited by:

    1. Adam J. Mersereau, 2015. "Demand Estimation from Censored Observations with Inventory Record Inaccuracy," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 335-349, July.
    2. Aditya Jain & Nils Rudi & Tong Wang, 2015. "Demand Estimation and Ordering Under Censoring: Stock-Out Timing Is (Almost) All You Need," Operations Research, INFORMS, vol. 63(1), pages 134-150, February.
    3. Alain Bensoussan & Pengfei Guo, 2015. "Technical Note—Managing Nonperishable Inventories with Learning About Demand Arrival Rate Through Stockout Times," Operations Research, INFORMS, vol. 63(3), pages 602-609, June.

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