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Abstract:
We study the effect of demand uncertainty on two classes of newsvendor problems by using stochastic dominance and variability orderings in applied probability, one is the classical newsvendor problem with minimization cost, the other is the newsvendor problem with maximization profit with two ordering policy. We get the monotonicities of the optimal cost (optimal profit) corresponding to the two classes of newsvendor problems with respect to the shortage penalty cost (two ordering cost), and equivalence of the two classes of newsvendor problems from the optimization and stochastic comparison's point of view. For the newsvendor problem with maximization profit, we provide the sufficient conditions to compare newsvendor's optimal profit under the dispersive ordering, and show that stochastic larger demand leads to larger newsvendor's optimal profit when two ordering cost is smaller than or equal to sales price, however, this result may not be true when two ordering cost is larger than sales price. We show that the optimal profit will decrease when demand variability increasing under the second degree stochastic dominance for any two ordering cost, and there exists a certain demand distribution, the optimal profit will increase when demand variability increases for those two ordering cost that is larger than a fixed value. We obtain similar results for the newsvendor problem with minimization cost. Several numerical examples are provided to show those obtained results.
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System Engineering Theory and Practice
ISSN: 1000-6788
Year: 2014
Issue: 7
Volume: 34
Page: 1756-1768
Cited Count:
WoS CC Cited Count: 0
SCOPUS Cited Count:
ESI Highly Cited Papers on the List: 0 Unfold All
WanFang Cited Count:
Chinese Cited Count:
30 Days PV: 9
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