Optimal order quantity by maximising expected utility for the newsboy model

2019 ◽  
Vol 12 (4) ◽  
pp. 410
Author(s):  
S. Srinivasan ◽  
C.D. Nandakumar ◽  
Mahadev Ota
Keyword(s):  
Expected Utility ◽  
Optimal Order ◽  
Order Quantity ◽  
Newsboy Model ◽  
Optimal Order Quantity

scholarly journals Coping with Loss Aversion in the Newsvendor Model

2015 ◽  
Vol 2015 ◽  
pp. 1-11 ◽  
Author(s):  
Jianwu Sun ◽  
Xinsheng Xu
Keyword(s):  
Expected Utility ◽  
Loss Aversion ◽  
Confidence Level ◽  
Profit Maximization ◽  
Optimal Order ◽  
Market Demand ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

We introduce loss aversion into the decision framework of the newsvendor model. By introducing the loss aversion coefficientλ, we propose a novel utility function for the loss-averse newsvendor. First, we obtain the optimal order quantity to maximize the expected utility for the loss-averse newsvendor who is risk-neutral. It is found that this optimal order quantity is smaller than the expected profit maximization order quantity in the classical newsvendor model, which may help to explain the decision bias in the classical newsvendor model. Then, to reduce the risk which originates from the fluctuation in the market demand, we achieve the optimal order quantity to maximize CVaR about utility for the loss-averse newsvendor who is risk-averse. We find that this optimal order quantity is smaller than the optimal order quantity to maximize the expected utility above and is decreasing in the confidence levelα. Further, it is proved that the expected utility under this optimal order quantity is decreasing in the confidence levelα, which verifies that low risk implies low return. Finally, a numerical example is given to illustrate the obtained results and some management insights are suggested for the loss-averse newsvendor model.

The Comparative Study of EOQ Newsboy and Silver-Meal Method for SMEs Business

2014 ◽  
Vol 1044-1045 ◽  
pp. 1807-1811
Author(s):  
Lakkana Ruekkasaem
Keyword(s):  
Optimal Order ◽  
Order Quantity ◽  
Inventory Cost ◽  
Eoq Model ◽  
Proper Number ◽  
Newsboy Model ◽  
Optimal Order Quantity ◽  
The Comparative Study ◽  
Ordering Quantity

This study was conducted to determine an appropriate model to be used so that a cleanroom equipment company will be able to order a proper number of various types of products to serve the demand of customers at different periods of time. The case study had high inventory cost due to the fact that it could not order goods accordingly. The research compared the efficiency of Economic Ordering Quantity (EOQ), Newsboy Model and Silver-Meal Method to find the optimal order quantity model for this company. The results of the study indicated that the EOQ model (in case allowing for some inventory shortage) obtained the least inventory cost.

Fuzzy random Newsboy problem with chance distribution

2020 ◽  
Vol 39 (5) ◽  
pp. 6857-6868
Author(s):  
Krishnendu Adhikary ◽  
Jagannath Roy ◽  
Samarjit Kar
Keyword(s):  
Equivalent Form ◽  
Expected Profit ◽  
Chance Constraint ◽  
Optimal Order ◽  
Order Quantity ◽  
Newsboy Problem ◽  
Proposed Model ◽  
Newsboy Model ◽  
Optimal Order Quantity ◽  
Fuzzy Random

Due to increasing difficulty and challenging issues of newsboy problem under uncertainty, managers seek newer and appropriate approaches to apprehend more accurately the demand for perishable products and or the products having a short shelf life. This paper investigates a newsboy problem with fuzzy random demand in a single product business scenario. The classical newsboy model is extended to a fuzzy random newsboy problem to determine the optimal order quantity and expected profit under hybrid uncertainty. To solve the proposed model, a new solution approach based on chance constraint programming is proposed to formulate the crisp equivalent form of the fuzzy random newsboy model. Numerical examples and a real-life case study are presented to show the utility of the projected model. From the outcomes, decision makers can make comprehensive recommendations for the optimal order quantity and expected profit obtained by our proposed model under two-folded uncertainty. Also, a sensitivity analysis suggests that the profit and order quantity will increase (or decrease) with the increase (or decrease) of the mean demand.

scholarly journals Coordination of Supply Chain with One Supplier and Two Competing Risk-Averse Retailers under an Option Contract

2016 ◽  
Vol 2016 ◽  
pp. 1-11 ◽  
Author(s):  
Rui Wang ◽  
Shiji Song ◽  
Cheng Wu
Keyword(s):  
Supply Chain ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Pareto Optimum ◽  
Risk Averse ◽  
Order Quantity ◽  
Supply Chain System ◽  
Chain System ◽  
Option Contract ◽  
Optimal Order Quantity

This paper studies an option contract for coordinating a supply chain comprising one risk-neutral supplier and two risk-averse retailers engaged in promotion competition in the selling season. For a given option contract, in decentralized case, each risk-averse retailer decides the optimal order quantity and the promotion policy by maximizing the conditional value-at-risk of profit. Based on the retailers’ decision, the supplier derives the optimal production policy by maximizing expected profit. In centralized case, the optimal decision of the supply chain system is obtained. Based on the decentralized and centralized decision, we find the coordination conditions of the supply chain system, which can optimize the supply chain system profit and make the profits of the supply chain members achieve Pareto optimum. As for the subchain, we also find the coordination conditions, which generalize the results of the supply chain with one supplier and one retailer. Our analysis and numerical experiments show that there exists a unique Nash equilibrium between two retailers, and the optimal order quantity of each retailer increases (decreases) with its own (competitor’s) promotion level.

scholarly journals Trade Credit with Barter in a Capital-Constrained Supply Chain

2021 ◽  
Vol 13 (20) ◽  
pp. 11361
Author(s):  
Yangyang Huang ◽  
Zhenyang Pi ◽  
Weiguo Fang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Wholesale Price ◽  
Uncertain Demand ◽  
Equilibrium Strategy ◽  
Optimal Order ◽  
Order Quantity ◽  
Supply Rate ◽  
Optimal Order Quantity ◽  
And Performance

Barter has emerged to alleviate capital pressure, maximize the circulation of goods, and facilitate the disposal of excess inventory. This study considers a two-level supply chain consisting of a manufacturer and a capital-constrained retailer with trade credit, in which the retailer exchanges unsold products for needed subsidiary products on a barter platform. The retailer’s optimal order quantity and the manufacturer’s wholesale price are derived, and the influences of barter and other factors on the equilibrium strategy and performance of the supply chain are examined; these results are verified and supplemented by numerical simulation. We find that the retailer can increase profit by bartering when facing highly uncertain demand, that the retailer’s optimal order quantity increases with the supply rate and demand for subsidiary products, and that both manufacturer and retailer benefit from the high supply rate of subsidiary products. However, barter induces the manufacturer to raise the wholesale price to prevent its profit from being harmed. In addition, the manufacturer suffers from the retailer’s initial capital.

scholarly journals Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Mathematics ◽  
2019 ◽  
Vol 7 (5) ◽  
pp. 429 ◽  
Author(s):  
Xiaoqing Liu ◽  
Felix T. S. Chan ◽  
Xinsheng Xu
Keyword(s):  
Value At Risk ◽  
Profit Maximization ◽  
Newsvendor Problem ◽  
Sensitivity Analyses ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

This paper studies the optimal order decisions for the loss-averse newsvendor problem with backordering and contributes to the risk hedging issue in the newsvendor model. The Conditional Value-at-Risk (CVaR) measure is applied to quantify the potential risks for the loss-averse newsvendor in a backordering setting, and we obtain the optimal order quantity for a loss-averse newsvendor to maximize the CVaR of utility. It is found that the optimal order quantity to maximize the CVaR objective could be bigger or smaller than the expected profit maximization (EPM) order quantity, which provides an alternative explanation on decision bias in the newsvendor model. This study also reveals that the optimal order quantity for a loss-averse newsvendor to maximize expected utility with backordering is smaller than the EPM order quantity, which implies that backordering encourages the loss-averse newsvendor to order fewer items. Sensitivity analyses are performed to investigate the properties of the optimal order quantities and managerial insights are suggested. This paper provides a novel method for the risk management of the loss-averse newsvendor model and presents several new ordering policies for the retailers in practice.

scholarly journals Economic Order Quantity Model for Perishable Items Having Exponentially Increasing Demand

2019 ◽  
Vol 9 (1) ◽  
pp. 462
Author(s):  
Sarbjit Singh ◽  
Sayan Banerjee
Keyword(s):  
Fast Moving ◽  
Economic Order Quantity ◽  
Optimal Order ◽  
Order Quantity ◽  
Perishable Items ◽  
Perishable Goods ◽  
Constant Rate ◽  
Rapid Pace ◽  
Optimal Order Quantity ◽  
Increasing Demand

This study considers perishable items whose deterioration starts immediately after procurement with constant rate of deterioration, ξ. The goods considered in the paper are fast moving goods whose demand is increasing at a very rapid pace. Therefore, the demand has been considered as exponentially increasing demand. This study provides the buyer with a policy that aids them to decide their optimal order quantity considering the goods are perishable goods with exponentially increasing demand.

Sign in / Sign up

Export Citation Format

Share Document