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Expected Value of Distribution Information for the Newsvendor Problem

Author

Listed:
  • Jinfeng Yue

    (Department of Management and Marketing, Jennings A. Jones College of Business, Middle Tennessee State University, Murfreesboro, Tennessee 37132)

  • Bintong Chen

    (Department of Management and Operations, College of Business and Economics, Washington State University, Pullman, Washington 99164-4736)

  • Min-Chiang Wang

    (Department of Management and Operations, College of Business and Economics, Washington State University, Pullman, Washington 99164-4736)

Abstract

This paper extends previous work on the distribution-free newsvendor problem, where only partial information about the demand distribution is available. More specifically, the analysis assumes that the demand distribution f belongs to a class of probability distribution functions (pdf) (F-script) with mean (mu) and standard deviation (sigma). While previous work has examined the expected value of distribution information (EVDI) for a particular order quantity and a particular pdf f , this paper aims at computing the maximum EVDI over all f (in) (F-script) for any order quantity. In addition, an optimization procedure is provided to calculate the order quantity that minimizes the maximum EVDI.

Suggested Citation

  • Jinfeng Yue & Bintong Chen & Min-Chiang Wang, 2006. "Expected Value of Distribution Information for the Newsvendor Problem," Operations Research, INFORMS, vol. 54(6), pages 1128-1136, December.
    • Handle: RePEc:inm:oropre:v:54:y:2006:i:6:p:1128-1136
    DOI: 10.1287/opre.1060.0318
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    References listed on IDEAS

    as
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