IDEAS home Printed from https://ideas.repec.org/p/iim/iimawp/12137.html
   My bibliography  Save this paper

Lower Bound for Cost Deviation in the Newsboy Model

Author

Listed:
  • Khanra, Avijit
  • Bandyopadhyay, Tathagata

Abstract

Quality of decisions in inventory management problems depends on accuracy of parameter estimates used for decision making. In many situations, error in decision making is unavoidable. In such cases, understanding sensitivity of objective function to sub-optimal decisions is necessary for better implementation of the model. We study sensitivity of expected demand-supply mismatch cost to sub-optimal ordering decisions in the newsboy model. We demonstrate through establishing a lower bound for cost deviation that the newsboy model is sensitive to error in ordering decisions. We generalize our conclusions to the discrete case too.

Suggested Citation

  • Khanra, Avijit & Bandyopadhyay, Tathagata, 2013. "Lower Bound for Cost Deviation in the Newsboy Model," IIMA Working Papers WP2013-11-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:12137
    as

    Download full text from publisher

    File URL: https://www.iima.ac.in/sites/default/files/rnpfiles/12629890332013-11-01.pdf
    File Function: English Version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
    2. Khanra, Avijit & Soman, Chetan, 2013. "Sensitivity Analysis of the Newsboy Model," IIMA Working Papers WP2013-09-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
    3. Qin, Yan & Wang, Ruoxuan & Vakharia, Asoo J. & Chen, Yuwen & Seref, Michelle M.H., 2011. "The newsvendor problem: Review and directions for future research," European Journal of Operational Research, Elsevier, vol. 213(2), pages 361-374, September.
    4. Louis Eeckhoudt & Christian Gollier & Harris Schlesinger, 1995. "The Risk-Averse (and Prudent) Newsboy," Management Science, INFORMS, vol. 41(5), pages 786-794, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mofidi, Seyed Shahab & Pazour, Jennifer A. & Roy, Debjit, 2018. "Proactive vs. reactive order-fulfillment resource allocation for sea-based logistics," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 114(C), pages 66-84.
    2. Herweg, Fabian, 2013. "The expectation-based loss-averse newsvendor," Economics Letters, Elsevier, vol. 120(3), pages 429-432.
    3. Youkyung Won, 2016. "Dominance Relationship Among the Retailer’s Strategies Under the Semi-Stackelberg Newsvendor Situation with Quantity Discounts," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 33(02), pages 1-20, April.
    4. Khanra, Avijit & Soman, Chetan & Bandyopadhyay, Tathagata, 2014. "Sensitivity analysis of the newsvendor model," European Journal of Operational Research, Elsevier, vol. 239(2), pages 403-412.
    5. Doran Wood & Sıla Çetinkaya, 2024. "A comparative analysis of how to handle stockout scenarios: the impact of newsvendor’s risk attitude," Annals of Operations Research, Springer, vol. 338(2), pages 1187-1218, July.
    6. Felix T. S. Chan & Xinsheng Xu, 2019. "The Loss-Averse Retailer’s Order Decisions Under Risk Management," Mathematics, MDPI, vol. 7(7), pages 1-16, July.
    7. Rubio-Herrero, Javier & Baykal-Gürsoy, Melike, 2020. "Mean-variance analysis of the newsvendor problem with price-dependent, isoelastic demand," European Journal of Operational Research, Elsevier, vol. 283(3), pages 942-953.
    8. Jammernegg, Werner & Kischka, Peter, 2013. "The price-setting newsvendor with service and loss constraints," Omega, Elsevier, vol. 41(2), pages 326-335.
    9. Brito, Anderson J. & de Almeida, Adiel T., 2012. "Modeling a multi-attribute utility newsvendor with partial backlogging," European Journal of Operational Research, Elsevier, vol. 220(3), pages 820-830.
    10. Ray, Pritee & Jenamani, Mamata, 2016. "Mean-variance analysis of sourcing decision under disruption risk," European Journal of Operational Research, Elsevier, vol. 250(2), pages 679-689.
    11. Khanra, Avijit & Soman, Chetan, 2013. "Sensitivity Analysis of the Newsboy Model," IIMA Working Papers WP2013-09-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
    12. Jammernegg, Werner & Kischka, Peter, 2013. "Risk preferences of a newsvendor with service and loss constraints," International Journal of Production Economics, Elsevier, vol. 143(2), pages 410-415.
    13. Xu, Minghui & Lu, Ye, 2013. "The effect of supply uncertainty in price-setting newsvendor models," European Journal of Operational Research, Elsevier, vol. 227(3), pages 423-433.
    14. Serrano, Breno & Minner, Stefan & Schiffer, Maximilian & Vidal, Thibaut, 2024. "Bilevel optimization for feature selection in the data-driven newsvendor problem," European Journal of Operational Research, Elsevier, vol. 315(2), pages 703-714.
    15. Helena Gaspars-Wieloch, 2017. "Newsvendor problem under complete uncertainty: a case of innovative products," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 25(3), pages 561-585, September.
    16. Yongho Lee & Taesu Cheong, 2022. "Service Level Constrained Distribution-Free Newsvendor Problem with Balking Penalty," Mathematics, MDPI, vol. 10(14), pages 1-14, July.
    17. Mohammadivojdan, Roshanak & Geunes, Joseph, 2018. "The newsvendor problem with capacitated suppliers and quantity discounts," European Journal of Operational Research, Elsevier, vol. 271(1), pages 109-119.
    18. Mehran Ullah & Irfanullah Khan & Biswajit Sarkar, 2019. "Dynamic Pricing in a Multi-Period Newsvendor Under Stochastic Price-Dependent Demand," Mathematics, MDPI, vol. 7(6), pages 1-15, June.
    19. Mohammad A.M. Abdel-Aal & Mujahid N. Syed & Shokri Z. Selim, 2017. "Multi-product selective newsvendor problem with service level constraints and market selection flexibility," International Journal of Production Research, Taylor & Francis Journals, vol. 55(1), pages 96-117, January.
    20. Weiwei Zhang & Zhongfei Li & Ke Fu & Fan Wang, 2017. "Effect of the Return Policy in a Continuous-Time Newsvendor Problem," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-28, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iim:iimawp:12137. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/eciimin.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.