Title: Managing reward and risk of the newsboy problem with range information

Authors: Guiqing Zhang; Yinfeng Xu; Yucheng Dong; Hongyi Li

Addresses: Management Science Department, School of Management, Xi'an Jiaotong University, Xi'an 710049, China. ' The State Key Laboratory for Manufacturing Systems Engineering, Management Science Department, School of Management, Xi'an Jiaotong University, Xi'an 710049, China. ' Ministry of Education Key Lab for Intelligent Networks and Network Security, The Organizational Management Department, School of Management, Xi'an Jiaotong University, Xi'an 710049, China. ' Department of Decision Sciences and Managerial Economics, The Chinese University of Hong Kong, Shatin, NT, Hong Kong

Abstract: Recently, the single-period, single-item newsboy problem for the case where demand distribution is limited (e.g., range, mean, mode, variance, symmetry) has been widely studied. However, the existing newsboy models with partial information are fit to risk-neutral inventory managers, and there are few studies about the risk analysis of the newsboy problems with partial information. This paper considers the newsboy problem with range information. Our approach employs the competitive ratio analysis which guarantees a certain performance level under all possible input sequences, and constructs a framework to manage risk and reward of newsboy problems under different forecasts (i.e., certain forecast, probability forecast and probability distribution). Comparing with the existing studies, this approach can help the newsboy choosing the optimal reward/risk order strategies with great flexibility, according to his/her own risk/reward tolerance levels and different forecasts. [Received 15 June 2010; Revised 19 November 2010; Accepted 28 April 2011]

Keywords: newsboy problem; competitive ratio; risk management; reward management; forecasting; partial information; certainty; probability.

DOI: 10.1504/EJIE.2012.051075

European Journal of Industrial Engineering, 2012 Vol.6 No.6, pp.733 - 750

Published online: 10 Sep 2014 *

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