Title: A note on optimal 'riskless' and 'risk' prices for the newsvendor problem with an assembly cost

Authors: Mingming Leng, Mahmut Parlar

Addresses: Department of Computing and Decision Sciences, Lingnan University, 8 Castle Peak Road, Tuen Mun, Hong Kong. ' DeGroote School of Business, McMaster University, Hamilton, Ontario L8S 4M4, Canada

Abstract: For an assemble-to-order firm operating in a single period, we find that, for the multiplicative demand case the optimal riskless price may or may not be higher than the optimal risk price. However, for the additive demand case, the optimal riskless price is always greater than the optimal risk price. [Accepted: September 2009]

Keywords: assembly-processing cost; risk price; riskless price; stocking factor; base prices; assemble-to-order; newsvendor problem; assembly costs.

DOI: 10.1504/IJIR.2010.031463

International Journal of Inventory Research, 2010 Vol.1 No.2, pp.209 - 219

Available online: 05 Feb 2010 *

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